Deloitte’s bi-annual survey of construction has shown that over the last six months 4.2 million square feet of new office space has been completed in the capital. This is the highest completion rate since 2004, according to the London Office Crane Survey.
The volume of offices under construction actually fell 13% despite a rise in new- starts. For the six months leading up to September, office floorspace under construction equalled 11.8 million square feet. Although this figure is down from the last survey, the recorded new-starts totalled 32 which is 23% up on the previous survey. This is a result of the new-starts amounting to 18% less physical volume, at 2.6m square feet; notably, this figure still beats out the long-term average of 2 million square feet.
Mike Cracknell, director in the capital projects advisory team at Deloitte Real Estate, said: “With 40 schemes totalling 4.2 million square feet completing this survey, this is the highest level of office space brought to market in over 14 years. 2018 is witnessing unprecedented office completions and we are expecting almost 7 million square feet to be completed before the year is out. The 13% decline in construction is therefore driven by these completions rather than any significant reduction in new-starts”.
The survey also revealed that tech firms are now the biggest customers when it comes to upcoming office space in London, overtaking the financial services industry. Tech, media and telecoms firms – or the TMT group, as they are sometimes known – are shunning lower-quality offices in order to win and retain staff, thereby driving up demand for high-quality space.
Mike Cracknell said that “Flexible coworking space providers taking grade A office space are enabling start-ups to emulate the talent strategy of the tech titans”.
The report noted that smaller firms are disregarding second-hand space in favour of serviced offices, which provide more attractive and higher quality workplaces which thereby help the retention of staff. Information like this clarifies an ongoing shift towards flexible workspaces, demonstrated by London having more coworking spaces than any other city.
Of the 11.8 million square feet under construction across central London by the end of September, 6 million is in the City of London; 1.7 million is in the West End; 1.1 million is in the Docklands; with another 1.1 million in King’s Cross; 1 million in Midtown; 0.6 million in Southbank and 0.2 million in Paddington.