Building activity for office space in central London jumped by 24% between October 2014 and March 2015, according to a new London Office Crane Survey by Deloitte Real Estate.
This level of office development is up on the previous year, but still below average compared to long-run averages. This year alone will see 7 million square feet of Grade A office space built which is the largest volume delivered since 2003.
The survey has highlighted that 880,000m2 of office space is currently under construction across City of London, West End, Midtown, Docklands, Southbank, and Paddington submarkets. 408,000m2 of floor space is for 31 new starts - the second highest increase in new starts in 20 years - whilst another third is for speculative builds.
Deloitte’s Head of City Leasing, Mr Steve Johns, said “Developer sentiment is continuing to improve, and this is good news for London’s diverse occupier base.
“A third of this space has already found new tenants, leaving 22 per cent of the new starts as speculative development schemes.
“There is no need to sound the alarm bells just yet as the development pipeline is only slightly above the average level of activity recorded in the past 10 years.”
The report underlines how the landscape of the office rental market in London is changing rapidly, with an increased demand for serviced office space. It links this observation with the fact that buildings which are unable to adapt in order to meet these requirements will become obsolete much earlier than previously anticipated.
Antony Duggan, Partner and Head of Research at Deloitte Real Estate, added: “Developers that started office development schemes at the first signs of economic recovery in 2011/12 are now reaping the rewards as their schemes complete at a time of reducing availability, increased tenant demand and rental growth.
“There are currently just 10 grade A buildings in central London that are available to let as a whole, and only five which can offer an occupier 100,000 sq ft of space or more, which is severely limiting choice.”