London office market 'reborn'

London office market 'reborn'
Thursday 16 May 2013

Construction activity in the capital running at three times the level of three years ago, with 9.7 million sq ft of office space under construction.

http://www.deloitte.com/view/en_GB/uk/news/news-in-focus/e72971f2eacae310VgnVCM2000003356f70aRCRD.htm

Office construction in central London has hit a four-year high while rental activity is also on the up, the latest figures reveal.

A total of 9.7 million sq ft of office space is now under construction in the capital, according to the London Office Crane Survey for summer 2013 published by Deloitte Real Estate.

It means construction activity in London is now running at three times the level seen when it reached a low in mid-2010.

Positive news

The report points to several other findings that strongly indicate a more upbeat mood among developers and occupiers, including:

- Commercial development in London has risen by 8% in the past six months
- 33% of office space still being constructed was pre-let in Q1 2013 - a surge since 2011 when the figure was just 1%
- Almost 4.5 million sq ft of office space is under construction in London - a 10% rise since November 2012

Deloitte also reports that the balance is swinging back in the favour of landlords, as an exceptionally low level of office construction in the capital last year means supplies have gradually become constrained and occupiers are finding themselves competing for Grade A space.

West End

Developers in the West End have reacted quickly to this trend, with 1.6 million sq ft of new office space - the highest level for seven years - set to be completed this year.

Although there are still relatively high levels of Grade A office space the report states that the new developments are being targeted in the right areas where demand is concentrated.

North of Oxford Street and Victoria are emerging as key locations for new office developments, the report finds, while some of London's smaller sub-markets such as King's Cross, Midtown and Southbank are also said to be attracting vibrant activity.

Added urgency

Anthony Duggan, partner and head of research at Deloitte Real Estate, believes the heightened construction activity and the increase in leasing transactions reflect "improving sentiment" across the London office market.

"Importantly, a number of the 'bellwether' vacant schemes across London are now transacting, reducing the ability of potential occupiers to sit back and wait for conditions to improve. This is likely to add a little more urgency into the leasing market over the next few months," he said.

With the latest Deloitte research identifying a "striking broad-based" rise in confidence among the UK's biggest firms, then barring any big economic shocks we should see an increased number of leases and more new developments as the year progresses, Mr Duggan added.

http://www.deloitte.com/view/en_GB/uk/news/news-in-focus/e72971f2eacae310VgnVCM2000003356f70aRCRD.htm