The amount of office construction and refurbishment projects in central London has started to recover despite continued uncertainty over future working patterns.
That is an increase of a fifth on the preceding six-month period, although it remained well below the record high of more than 5 million sq ft of new projects in the six months to March 2020.
In its twice-yearly London Office Crane Survey, Deloitte said that the amount of office construction projects getting under way in the last six months was above the long-term average. For the second survey running the majority of new projects were refurbishments involving extensive upgrades. of existing office space. It found that 4.5 million sq ft of office space development was completed in the six months to March, the highest level in 18 years, with 59 per cent of it pre-let.
With completions outstripping new project starts, that means that the total volume of office construction projects under way dropped by 9 per cent since the last survey, to 13.7 million sq ft. However, 57 per cent of developers were looking to increase construction pipelines in the next six months.
“Many existing office buildings are capable of being turned into Covid-safe and high-quality workspaces, so it is unsurprising that developers are following the more sustainable path of refurbishments.”
The survey also found that developers remained nervous about the demand for offices, with 85 per cent highlighting “weak tenant demand for office space as a major concern in the London office market”. However, respondents were more positive than six months ago — 57 per cent felt leasing demand had improved.
Richard Hammell, UK head of financial services at Deloitte, said: “With the acceleration of shifting working patterns, the financial services sector is consolidating its office presence in central London, whilst in parallel considering how businesses and functions can be deployed outside the capital, supporting regional growth.”
Cracknell said: “The move towards greater workplace agility and use of hybrid working models is likely to lead to a drop in office space required by tenants. However, the actual impact is likely to be sector-dependent.”