NuGen Properties

London office construction market rebounds with gusto

Deloitte’s Winter 2023 London Office Crane Survey shows 5.1 million square feet of new construction starting across 43 schemes between 1st April 2023 to 30th September 2023.

This is the highest volume of new starts since Deloitte began measuring in this way in 2005.

The sq ft total is 16% higher than in the last survey and with seven fewer schemes starting. The average new scheme size rose to 119,000 sq ft, from 88,000 sq ft previously.

Refurbishment starts specifically have broken records for the second consecutive survey, with 34 schemes covering 3.3 million sq ft. The increase in refurbishments is being driven by the anticipated tightening of minimum energy efficiency standard (MEES) regulations, coupled with tenants’ own sustainability aspirations.

Sophie Allan, director in real assets advisory at Deloitte, said: “New builds have roared back from their post-pandemic nadir, which has likely been driven by large pre-lets and growing developer confidence in the demand for premium office space. Meanwhile, refurbishments continue to play a critical role in London’s development pipeline as the increasing need to modernise office space to avoid obsolescence grows. The future will see further skyscrapers added to the City’s skyline, with three large developments recently obtaining planning permission.”

As of 30th September 2023, there are 124 schemes under construction across the central London market, with a total volume of 15.7 million sq ft. This represents a 9% increase on the total construction volume of 14.4 million sq ft. recorded in the last survey.

Margaret Doyle, partner and chief insights officer for financial services and real estate at Deloitte, said: “As predicted in last winter’s survey, the construction industry is now catching up following the pandemic. Demand for premium office space is still fuelling rising construction new starts this year, but supply chain issues and other construction delays may continue to affect completion dates. Interestingly, developers we have spoken to seem to be more concerned about the supply of, rather than demand for, premium space. With the increased volume of new starts and completions reported this year, there is a healthy amount of prime office stock on its way to the market.

“Despite this, the macro-environment for the London office market remains challenging. The current economic and geopolitical backdrop implies significant uncertainty about the future path of energy prices, inflation, and interest rates. But for now, developers seem prepared to bet that, if they build premium office space, the metropolis will continue to attract occupiers.”

The survey suggests that the City of London has bounced back, with 2.4 million sq ft of office space starting across 16 schemes. This includes two large new build starts and the largest refurbishment start of the survey. Together these schemes represent almost 1.4 million sq ft of new starts.

By comparison, new starts in the West End declined by 13% to 1.1 million sq ft. This is in part due to a number of developments completing during this survey period, as it continues to show strong levels of activity, Deloitte said. Southbank has recorded an increase of 19% this survey period, largely driven by a 385,000 sq ft refurbishment.

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Dan Morten 18/01/22

Easy to work with, Jordan and the team were professional and were easy to communicate with.
Would highly recommend.

Di Hayes 20/08/22

NuGen Properties built an extension to the rear of my property, replacing the old conservatory. I am so pleased I chose this company. From the initial quotation, through the build and after they were professional, polite & well mannered. They kept the site tidy throughout the build and kept me informed of each stage as it happened. The work was finished to a good standard and I have had nothing but compliments on their work. I am already planning for them to come back and do some more work for me in a few months. I would 100% recommend them.

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