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London office development starts to plummet

Words: Huw Morris

Office development in London has collapsed in the past six months, with volume of new-build and refurbished projects dropping by 50 per cent.

Deloitte’s latest London Office Crane Survey, a barometer of developer confidence, shows that construction starts fell to under 242 million square metres across central London in the six months to September.

However, Deloitte said despite the significant drop, the volume is broadly in line with long-term averages and exceeds new starts in the same period of 2019. A total of 40 per cent of new construction starts had already been committed, although Deloitte said at least six speculative schemes have been put entirely on hold until there is more clarity in the market, with many more postponed until 2021.

Demand for leases also plummeted in the second quarter as lockdown prevented prospective tenants from visiting buildings. Demand remained low in the third quarter, as staff largely continued to work from home, and businesses put longer-term workplace decisions on hold, with just 93,000 square metres of central London space leased in the three months to September – well below the 315,870 square metres recorded in the same quarter of 2019.

The government’s second lockdown for England, which started this month, has raised further questions about when London workers might return to the office, Deloitte added.

The largest new start between April and September was 20 Ropemaker, a 44,000-square-metre development close to the new Crossrail entrance at Moorgate station in the heart of the City of London.

Demolition work had begun in 2019 and the scheme had attracted a major pre-let from Linklaters shortly before the pandemic, leaving only a third of the space available. This office building is expected to be completed in early 2023.

Further details of the research are available here.

Image credit | iStock