The winter 2024 edition of the Deloitte London Office Crane Survey also revealed a decline in new construction starts and a decrease in delivered projects.
The survey – which collected data between April and September 2024 – recorded 3.7 million sq ft of new office construction starts across 29 schemes, representing a 12% decrease in volume compared to the previous survey. The figure remained above the 10-year average of 3.4 million sq ft.
Researchers recorded the start of 1.2 million sq ft across 18 refurbishment schemes – which represented a 57% decrease compared to the volume recorded in the previous survey. For the first time in 4.5 years, volumes of new build traditional offices marginally exceeded those of refurbishment.
Philip Parnell, partner and head of valuation and real estate climate & sustainability lead at Deloitte, said: “Refurbishment levels have pared back markedly in this survey from previous high levels, and likely a reaction to the economic, geopolitical and wider global concerns prevailing during the survey period.
“However, developers’ appetite to maintain their pipeline of activity, coupled with the continuing need to address evolving occupier requirements and ESG credentials, suggests this may be a blip rather than a trend.”
Life science schemes, which contain both laboratory and office workspaces, were responsible for 35% of new construction starts, representing 1.3m sq. ft. These developments are the main drivers of new activity in the King’s Cross and Docklands submarkets.
New construction fell across the other Central London submarkets, except for the City, which saw a 7% uptick in new office construction activity.
A survey of developers conducted alongside the crane survey indicated that there remains an overarching positive sentiment towards sustained growth in the development pipeline.
Developers’ optimism is high as 92% said their development pipeline will increase or stay the same in the next six months. The proportion of developers expecting a reduction in their pipeline is markedly less than two years ago (55% vs. 8%).
Caroline Waldock, partner and real estate lead at Deloitte, said: “Activity in the life science sector may reinvigorate quieter markets in the short-term, but demand for this space is less certain.
“Looking further ahead, the recent cut in interest rates and the easing of construction cost inflation could be crucial in boosting new scheme numbers. Our survey has recorded a renewed sense of positivity among developers that suggest the decreases we’ve noted may be short-lived.”
The survey recorded the delivery to market of 2.7 million sq ft of office space across 35 schemes, 28% less than the 3.8 million sq ft that was expected to be delivered.
These delays have contributed to the record high levels of ongoing construction – currently standing at 16.8 million sq ft.
