Building activity in central London has jumped by 28 per cent in the last six months to a reach a seven-year high, according to data released today.
Deloitte Real Estate’s latest Crane Survey, which tracks building activity across the capital, said there were 26 new starts in the period totalling three million square feet and taking total space under construction in central London to 11m sq ft.
The City office market led the way with 13 new starts in the period including Brookfield’s 100 Bishopsgate which, at 867,000 sq ft, was the largest tower to get underway. Overall, construction in the City rose by a quarter to 5.7m square feet.
However despite a surge in activity, this is still half the amount of space under construction at the last peak in 2002 (19.5m sq ft) and comes at a time when vacancy rates in the capital are at a 15-year low, which has put pressure on rents.
According to recent data from BNP Paribas Real Estate, the level of supply at the end of the September was just 10.29m sq ft, equivalent to less than one year's supply at current levels of take-up.
Developers are still playing catch up following the financial crisis when many schemes were put on hold. As a result there are still relatively few schemes being completed, Deloitte Real Estate’s head of research, Will Matthews said.
"We expect that just 3.3msq ft of space will complete in 2015, the lowest amount for three years. Looking ahead though, the development pipeline for 2017-19 is filling up as work commences on new schemes," he added.
Around 38 per cent of space under construction has already pre-let as companies compete to secure the best space. Technology, media and telecommunications (TMT) firms led the charge, taking 44 per cent of office space leased during construction in the last six months followed by financial services, which accounted for 27 per cent of lettings.
Matthews said: “Ultimately the rise in office development recorded in our latest crane survey comes after five years of relatively low delivery, which has exacerbated the current shortage of available Grade A stock. This new space will not be completed for some time and we forecast further upward pressures on rental levels in the short term.”
He added that recent economic uncertainty caused by factors including China's markets slowdown had not shown any signs of dampening demand for space: "Companies are still massively increasing the space they take in these new schemes from a combined 2.3m sq ft [in their previous buildings] to 4.2m sq ft in the new ones," he told City A.M.
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