The second half of 2012 saw a distinct lack of office space development compared to previous years, according to the latest Crane Survey from Drivers Jonas Deloitte. Research shows that there is a “pause” in the rise of construction activity in Central
London as the capital’s pace of property development appears to have slowed.
According to Drivers Jonas Deloitte, there has been a large increase in construction activity over the last 18 months which makes these latest figures so marked. This year, the first half of 2012 saw 34 new starts, while the second half recorded just 25.
However the rate of development is considered steady, given that the number of new starts matches the number of completions. Currently there is 9 million sq ft of office space under construction in Central London.
But what has caused the city’s office space scene to flatline – and why?
Subdued tenant demand has been largely blamed for the reduced construction activity, along with business uncertainty in the wider economy. Furthermore a massive 25% of all office space projects under development in London are refurbishments – which suggests that developers may be sticking to the slightly safer ground of redevelopment, rather than brand new projects.
The report shows that certain areas are faring better than others – for instance development in the City of London is currently 15% higher than six months ago. This is thought to be due to a more diverse range of business sectors targeting the City, such as design and technology firms, aside from the staple City markets of finance and insurance.
Drivers Jonas Deloitte’s partner and head of research, Anthony Duggan, commented that wider tenant demand “remains low” in Central London, suggesting that take-up in 2012 will “struggle to reach 2011 levels”.
However overall, the report maintains positivity and claims that the current level of commercial property development is “manageable”. It states that developers and investors “still have confidence” in the viability of the London office market and states that in terms of property development, Central London “continues to fare well”.
Duggan added: “Developers have been encouraged by increased letting activity amongst the schemes under construction with several schemes having achieved early-letting success over the last six months. We expect additional letting activity to be announced over the next few months – reducing further the volume of available space that is being delivered.”
