2023 to be ‘Year of Catch-up’ for London office projects

Aaron Morby 2 weeks ago
Share

Following post-pandemic delays, 2023 could be the ‘Year of the Catch-up’ delivering the highest volume of new office space for twenty years.

Deloitte’s London Office Crane Survey is predicting that next year will see the beginning of a resurgence in office project planning and construction activity in the capital.

Latest data collected on schemes with planning permission and those in demolition suggests an extra 15.6m sq ft of new office stock is expected to be delivered between 2023 and 2027, all of which is yet to begin construction.

Presently there are 26 schemes currently in demolition/strip-out, with a total volume of 4.3 m sq ft.

Despite economic headwinds, these are expected to start construction during the next survey period, between October 2022 and March 2023, and will probably drive a significant rise in new start volumes in next survey.

Margaret Doyle, chief insights officer and partner for financial services at Deloitte, said: “The past year has been characterised by an uptick in post-pandemic refurbishment activity.

“Looking forward, 2023 could turn out to be the ‘Year of the Catch-up,’ but this will depend on whether supply chain disruptions, labour shortages, financing difficulties or material price inflation cause further completion delays.

“Looking further forward to 2025, we anticipate it will be the ‘Year of the Investor’ as renewed pressure on stock stimulates rental growth, creating a wave of fresh opportunities for developers.”

In the six months to September, the London Crane Survey recorded 31 schemes with a total volume of 2.5m sq ft were started.

Refurbishments remain a strong feature of new construction activity, representing 26 of the total new starts during the survey period.

This represents a 6% rise in volume from the previous survey (2.3m sq ft), but remains below the ten-year average (2.9m sq ft).

Almost nine in ten developers continue to rate construction costs as their leading challenge, albeit a smaller proportion than seen in the previous survey (100%).

Now concerns are turning to the availability of funding. More than a quarter of developers (27%) cite availability of funding as an issue, compared to none in the previous survey.

Sophie Allan, director of real assets advisory at Deloitte, said: “Construction costs are likely to remain a major challenge over the near term.

“Likewise, rapidly increasing debt funding costs will continue to weigh on scheme viability where sites have already been acquired. This, along with inflation in tender prices, will put pressure on land prices going forward.”

The legal profession has taken the largest proportion of under-construction pre-lets, representing a third (33%) of total pre-completion let volumes.

Meanwhile, by contrast, the share of pre-completion letting volumes taken by financial services firms has shrunk by almost half in under five years to 17%. The overall share for these two sectors has grown since the last survey, from 44% to 50%.

Doyle said: “The decline in financial services pre-completion letting volumes is balanced by significant growth in the legal sector. In many cases, office moves have been driven by a desire to move to accommodation with stronger ESG credentials and helps support employee wellbeing. The preference for higher quality Grade A space that we see across sectors is one we expect to endure.”

Latest news

John Lewis £500m funding deal to build 1,000 rental homes

Deal to advance BTR flats at store sites in Bromley, West Ealing and Reading
12 hours ago

Eric Wright wins tricky £52m Liverpool transformation

Contractor working with engineers at Ridge and Partners on "challenging" Stanley Lock Flight site
3 days ago

Investment giant buys Bristol M&E contractor

RDCP Infrastructure acquires Avon Combined Electrical Services
3 days ago

Demolition start for £50m Farnworth town centre rebuild

Caddick Construction is tipped for main works due to start in the spring
3 days ago

L&G Modular strikes deal to build 1,000 affordable homes

Modular homes business teams up with Hampshire's Vivid housing association
3 days ago

Former Erith operations director joins John F Hunt

Scott Exell named new operations director at demolition specialist John F Hunt
3 days ago

Green light for £135m Leeds twin tower resi scheme

Construction to start in New Year on 500 build-to-rent apartments
4 days ago

Mace hits 1m tonnes carbon saving target for clients

Present work pipeline betters 2026 carbon emission saving target
3 days ago

Plans in for £40m surf park at former Kent colliery

Seahive surf lagoon and health resort will be built near Deal
4 days ago

Crushed demolition worker vows to return to industry

Shannon Brasier hoping to return to construction following horror accident
4 days ago

Mount Anvil to start 900-home North London estate rebuild

Planning approval paves way for Barnsbury Estate rebuild in Islington
4 days ago

Green light for major laboratory campus in Cambridge

Developer BioMed to tender first building on 600,000 sq ft lab complex in the New Year
4 days ago

Belfast firm signs the biggest work deal yet under Project Gigabit

Fibrus to hook-up rural Cumbria to lightning-fast broadband under £108m deal
4 days ago

McLaren wins Leeds logistics park contract

Work to start imminently on warehouse complex for Firethorn Trust
5 days ago

Work restarts on £683m waste power plant after site death

Construction suspended for a week of investigations following fatality
5 days ago

Demolition starts on £135m Wigan Galleries scheme

Contractor BCEGI starts work on project to redevelop Wigan town centre
5 days ago

Amey CEO to step down following private equity buyout

Amanda Fisher to leave once business is transferred to new owners
5 days ago

New body set up to vet plant operator card schemes

Contractor trades bodies unite to tackle competency concerns over plant operator skills cards
5 days ago

Kier leads switch to hybrid battery generators

Battery units work alongside smaller generators cutting run times by nearly 60%
5 days ago

Plans in for first Leeds co-living scheme

Watkin Jones submits plan to convert old Direct Line HQ into 230 studio flats
5 days ago

Demolition worker crushed by excavator

Court hears 20-year-old woman was left with "life changing injuries"
6 days ago

Government pays £700m for 50% stake in Sizewell C

New body, Great British Nuclear, will be set up to develop pipeline of nuclear projects
6 days ago

Costain wins Heathrow Airport asset renewal deal

Firm takes early contractor involvement role in Terminal 2 baggage handling upgrade
6 days ago

Worker killed on £683m waste power plant site

Fatal collision involving heavy goods vehicle on giant north London site
6 days ago

HS2 JV shifts four Wembley Stadiums of earth in record time

EKFB team digs and hauls 15 million cu m of muck in 20 months
6 days ago

Milestone wins £300m Wiltshire highways upkeep

Ringway will hand over to Milestone in March next year
6 days ago

Low-risk business model helps Renew post record results

Renew reveals latest acquisition with £15.6m purchase of water specialist Enisca
6 days ago

London Albert Embankment hotel towers approved

Two separate hotels rising to 26 and 29 storeys approved
6 days ago

Keltbray names new director of strategic engineering

Tim Lohmann takes up newly-formed role to drive innovative engineering solutions
6 days ago

Go-ahead for £200m lithium refinery on Teesside

Work to start next year on Europe's first lithium hydroxide processing plant
7 days ago

Contractor services