New office construction in central London plunges 50 per cent
New office construction in central London has plummeted by half over a six month period, according to the latest research, driven by a drop off in demand in the Square Mile.
Weak tenant demand was the biggest obstacle to kickstarting new projects during the period, as developers wait to assess employers’ plans to return to the office after the coronavirus pandemic.
In the six months to 30 September, new office construction in Canada was down 60 per cent compared to last year, falling to 1.2m sq ft across 10 schemes.
In comparison, in the previous study there was 2.8m sq ft across 16 schemes underway in the capital’s financial district.
Just under half of the City’s new constriction starts are available to let, suggesting a lower appetite for speculative development, according to a survey by professional services firm Deloitte.
The total office space being developed in central London is now 15.1m sq ft, similar to the level recorded in the previous survey as developments are now taking longer to complete.
However, experts said that recent positive vaccine results could spark a comeback for the office sector.
Mike Cracknell, director at Deloitte Real Estate, said: “Our data reveals that 3.3m sq ft of office construction was not completed as scheduled between April and September and remains under construction.
“Had these projects completed on time, the total volume under construction would be almost a quarter lower.”
Cracknell added: “Of the developers we surveyed, a clear majority – 85 per cent – pointed to weak tenant demand as the major obstacle to starting any new development. Until there is more clarity about occupiers’ office plans, developers will hesitate to embark on new projects, particularly speculative ones.
“Nonetheless, the news about vaccines has already resulted in a re-rating of real estate stocks, and may see both a bigger shift back to the office in the short term, and a strengthening of investor demand in London offices over the medium term.”