London office construction starts slump by half

London saw the number of new office building starts in the last six months fall by nearly half, with just four schemes getting underway in the Square Mile compared with the 11 that kicked off earlier this year.

According to the latest London Office Crane Survey, published twice-yearly by consultant Deloitte, the capital’s financial hub witnessed work start on just 200,000ft² of development in the past six months, versus the 1.2 million ft² recorded by the previous survey.

Overall, London witnessed a 49% slump in new office construction starts, with work starting on 24 schemes – 1.8 million ft² – compared to 37 schemes, or 3.5 million ft², in the previous six months.

But while Deloitte reported the volume of total new starts was nearly 15% down on the long-term average of 2.1 million ft², it said the latest numbers revealed “a rebalancing of office development following a three-year high of new construction starts, rather than a worrying decline”.

Beyond the City, Deloitte said the West End had seen 11 new starts in the last six months, including seven refurbishments, with 35 new offices set to add 2.2 million ft² of space to the market.

London’s Midtown – more commonly known as the Holborn and south Bloomsbury districts – and the South Bank had seen an increase in construction activity, with the latest survey highlighting four and three new offices breaking ground in the areas respectively.

The South Bank has seen the start of the Bankside Yards 220,000ft² office development, the first phase of a massive 1.4 million ft² mixed-use scheme being developed between Tate Modern and Blackfriars Bridge by Native Land.

Multiplex and Balfour Beatty are in the running for that job, which includes an 18-storey office block, called Arbor, as well as two residential buildings comprising 257 homes, all designed by PLP.

The technology, media and telecoms sector’s enthusiasm for new high-spec space saw its share of pre-let accommodation under construction shoot up from 35% in the first three months of 2019 to 43% in the third quarter, while the proportion of pre-completion lettings for the financial services sector dipped from 29% to 16%.

Mike Cracknell, Deloitte’s real estate director, said the crane survey suggested developers were taking time out.

But he added: “Looking ahead, central London still has three million ft² of proposed office space in demolition, which indicates the next survey could see an uptick in new starts, albeit modest.” 

Cracknell said delays in the completion of some large schemes, notably the 22 Bishopsgate tower, the City’s tallest and due to complete next spring, meant the total completion volume for 2019 was set to fall short of the 2018 figure by 23%.