London office starts rise as confidence returns

Aaron Morby 4 years ago
Share

London’s office market is seeing a significant improvement in confidence with the volume of new starts and speculative appetite rising.

According to the London Office Crane Survey by Deloitte, the volume of new starts increased by 10% from the previous survey in May, to 3.4m sq ft between April and September 2021. This rise is holding starts in space terms well above the long-term average of 2.4m sq ft.

The average scheme size has risen by 28%, demonstrating a greater appetite to take on risk on individual schemes.

Mike Cracknell, director in real estate at Deloitte, said: “The volume of new starts points to the resilience of demand for offices, in spite of the dramatic shift in working practices in response to the pandemic and months of home working.

“The survey shows a rise in pre-lets of new construction starts with 19% observed this time, up from 10%.  Alongside this, there have been high levels of speculative development – above the survey’s long-term average.”

He added that the very high proportion (85%) of new starts that were speculative reflected developers’ ability to ‘look through’ the short-term effects of the pandemic to a future where occupancy and demand will rebound, even if working patterns and office configurations also change.

Developers are now less concerned about the impact of home working on demand for office space than they were at the onset of the pandemic.

More than a third (37%) predict home working will have no impact on leasing demand, three times the proportion (12%) compared to 12 months ago.

The survey in September pointed to a slight easing in the proportion of office refurbishments over new builds, although refurbishments still account for 54% of new start volumes.

Philip Parnell, real estate valuation lead at Deloitte, said: “The uptick in new builds over the past three surveys has not disrupted the trend towards refurbishments – a structural shift we believe is happening driven not least by sustainability considerations.

“In addition to the cyclical attraction of refurbishments in uncertain times, concerns over embodied carbon has also prompted an aversion to outright demolitions. The focus on refurbishment over redevelopment is unlikely to diminish as carbon accounting including embodied carbon and the drive to net zero continues to gather momentum.”

And a quarter of developers said they expect all their new developments to be net zero by 2024, and 45% expect to achieve this between 2025 and 2029.

Leasing demand


Deloitte’s research also shows developers (90%) are more optimistic about leasing demand than six months ago, with more than a third (35%) finding it “much better” and 55% “a little better”.

Reflecting this optimism about leasing demand, almost two-thirds (65%) of developers expect their pipeline to increase and none expect it to fall, compared to just 7% and 29% respectively in the Winter 2020 Survey.

Latest news

13-year-old becomes UK’s youngest qualified digger driver

Grandson of Gallagher Group chairman sets industry record
5 hours ago

Cubby reborn in £12m Svella-backed takeover

£50m revenue target set as 14 firms combine under new Cubby Group banner
20 hours ago

North East NHS trusts plot £3bn health estate overhaul

Market engagement begins for major construction push across four trusts
20 hours ago

HG goes green on cranes in £1.2m switch to battery power

Diesel-free crane drive cuts fuel bills by 94%
21 hours ago

Developer fined £165,000 for fire safety failings

Firm ignored fire safety orders on apartment job in Preston
21 hours ago

Bidding to start for £1.8bn North West framework

Contractors invited to bid for latest Procure Partnerships deal
21 hours ago

Hill hits record £90m profit as homes pipeline swells

Build-to-rent push and £4.8bn contracting book to fuel next growth phase
2 days ago

Rayner unveils £39bn plan to build 300,000 social homes

Council building revival and rent reform feature in social and affordable homes plan
2 days ago

Keltbray bounces back with £3.2m profit

Tighter controls and smarter project selection fuel strong turnaround
2 days ago

VINCI JV wins 500-home twin town centre revamps

Chester Northgate phase 2 and Northwich Weaver Square schemes move to delivery stage
2 days ago

80 energy projects unlocked as Ofgem backs grid expansion

£24bn energy networks deal gets green light from regulator
3 days ago

How to see your stories on the Enquirer

Join our Suppliers and Buyers directory to get your news published
2 days ago

Henley lands Midland Mill revamp on Leeds tower scheme

Restoration of 18th-century mill kicks off on South Bank regeneration project
2 days ago

New boss at Eric Wright Civil Engineering

Gavin Hulme takes top job as Diane Bourne moves to group role
2 days ago

Pinewood submits £1bn data centre plan

Studio giant adds green and learning spaces to tech hub blueprint
3 days ago

Record results after TClarke goes private

Britain's biggest M&E contractor flourishes after de-listing
3 days ago

Dalkia lands £200m nuclear maintenance deal

1,000 nuclear FM staff to join M&E contractor
3 days ago

Construction comeback to outpace wider economy

Arcadis forecast fueled by spending review optimism
4 days ago

First steel goes up on giant car battery site

Severfield gets to work on McAlpine Somerset site
4 days ago

Permasteelisa wins cladding deal on Bovis city tower

Facade specialist lands package at 60 Gracechurch Street
3 days ago

Fox buys recycled asphalt specialist Fisher

Acquisition adds major recycled asphalt capacity in north west
4 days ago

Major Building Safety Regulator shake-up to end tower delays

HSE stripped of control and top fire chiefs brought in to fast-track stalled schemes
4 days ago

Hinkley trio sign Sizewell civils deal

Balfour,Bouygues and Laing O'Rourke form Civil Works Alliance for new power station
4 days ago

£3.9bn data centre plan for Ravenscraig steelworks

Green energy to power massive new steel to silicon AI campus
4 days ago

Breakthrough on HS2’s second longest tunnel

8.4 mile Northolt to Old Oak Common drive completes
4 days ago

Neilcott on fast-track to debt-free employee ownership

£22.5m loan nearly paid down after big profit year
4 days ago

TfL kicks off race for £700m Tube station upgrade

South Kensington and Elephant & Castle top the pipeline list
4 days ago

Corbyn Plant Hire fleet goes under the hammer

Kit to be sold off by sister firm to collapsed groundworks contractor
4 days ago

Government wields procurement stick on late payment

New rules would block slow payers from bidding on big public jobs
7 days ago

Hercules buys power line labour firm for £15.7m

Labour supply specialist snaps up Advantage NRG to tap booming electricity upgrade market
7 days ago