London office market shows signs of slowing

New office construction in London has dropped by almost 20 per cent while refurbishment starts have fallen by a quarter, according to a new survey.

A total of 42 new schemes broke ground in the capital from October 2023 to March 2024, data from Deloitte’s latest London Office Crane Survey shows.

These new offices cover a total of 390,000 square metres.

Deloitte noted that the volume of new starts was still higher than the 10-year average of 307,000 square metres.

But the latest figures represent an 18 per cent decrease compared with the 474,000 square metres recorded in its previous survey, published last November.

Refurbishment starts in London exceeded 230,000 square metres from October 2023 to March 2024.

This marked a 25 per cent fall compared with the all-time high of 307,000 square metres in Deloitte’s previous London survey.

Despite this decrease, Deloitte’s director of real assets advisory Sophie Allan said that demand for refurbishment will remain strong over the next decade.

“The desire for premium office space as well as the implementation of energy standards has powered projects centred on modernising outdated premises,” she said.

Deloitte’s latest report noted that 127 office schemes covering a “record high” of 1.5 million square metres are under construction in the capital. This data includes new starts from previous crane surveys.

Margaret Doyle, partner and chief insights officer for financial services and real estate at Deloitte, said: “Uncertainty created by economic headwinds such as high interest and inflation rates and supply chain disruptions has delayed schemes, thereby increasing the volume of office space under construction.”

She added that some developers were trying to de-risk jobs by delaying instructing contractors until a substantial portion of the scheme has been let.

Such defensive actions “may presage a medium to long-term supply squeeze”, said Doyle.

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