Rising confidence among developers and occupiers has pushed office building in the Square Mile to a four-year high, industry experts said today.
The latest biannual London Crane Survey compiled by Deloitte Real Estate — seen exclusively by the Standard — reveals nine new building projects under way in the City in the last six months, totalling 1.3 million sq ft, as major tenants clamour for space.
The recent surge in activity has pushed the total office space under construction in the Square Mile, including skyscrapers like the Walkie Talkie and the Cheese Grater, past the 5 million sq ft mark for the first time since 2009.
A recovering economy combined with a development hiatus, caused by the recession and the expiry of long-term leases signed in the wake of the 1980s Big Bang, has put the squeeze on office space. With major tenants including Schroders and M&G Investments looking for significant space, there are just four completed buildings currently on the market able to accommodate lettings of 100,000 sq ft or more. The supply crunch is beginning to be felt in rising rents from prime City space which rose for the first time in three years in August, to £57.50 a square foot.
Deloitte Real Estate’s head of research Anthony Duggan also pointed to rising confidence among senior management over the economy and willingness to commit to expansion. He added: “Leasing events and a shortage of supply drives demand but you also need confidence from occupiers to go ahead with a big leasing, and that is starting to come through.”
While the City is picking up pace, construction in the West End slackened off in the past six months with just 1.5 million sq ft under way — 36% below the previous survey and the lowest since 2010. This leaves overall office construction underway across central London at 9.7 million sq ft, marginally down on six months earlier.
Agents CBRE said companies seeking office space in the capital should look as far as five years ahead to manage the supply shortage. CBRE added: “Employment is at a record high in the capital. The fall in office supply is now greater than the demand. Take-up is as high as pre-2007 but there is now starting to be less choice.”
