17 May 2013
Bucking a national trend, commercial development in London is up 8% over the last six months with 9.7 million sq ft of office space currently under construction.
Even though across the UK construction output fell to a 15-year low in the first three months of 2013, according to the UK’s Office for National Statistics, construction activity across London has now more than trebled since activity reached a low in mid-2010, says the latest London Crane Survey by Deloitte Real Estate.
Tenants are also snapping up leases on new space.
In Q1 2013, 33% of space under construction was pre-let – equivalent to six Shards, says Deloitte – a sharp contrast to 2011 when only 1% was pre-let.
Cranes dominate in the financial district, the City of London, with nearly 4.5 million sq ft under construction there, up 10% since the last survey in November 2012.
City of London, April 2013, with towers at Fenchurch and Leadenhall streets under construction. (Credit: KrakenHammer/Wikimedia)
2012 saw the lowest level of office completions in the City for over 25 years.
This unprecedented low level of new supply has allowed the rebalanced the market in favour of the landlord, as the supply of office space falls, Deloitte says.
But Anthony Duggan, head of research at Deloitte Real Estate, said the increase in construction and leasing transactions also reflects improving sentiment in London.
"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," he said.
"This is likely to add a little more urgency into the leasing market over the next few months."