Developers are opting to build out smaller schemes as the volume of offices under construction in central London fell 13 per cent despite a rise in new starts, the latest Deloitte crane survey has revealed.
The bi-annual survey of construction activity found that the office floorspace under construction equalled 11.8m sq ft for the six months to September, a 13 per cent drop since the previous survey.
However, completions rose to a 14-year high of 4.2m sq ft during the period – the highest since 2004.
The survey recorded 32 new starts, a rise of 23 per cent on the previous survey. In terms of volume, these new starts totalled 2.6m sq ft, a drop of 18 per cent but still above the long-term average of 2m sq ft.
Deloitte noted that the decline in construction activity was in part driven by significant completions as well as the fall in new starts by volume.
It predicted that “unless more schemes commence in the next few months, the lower volume of construction is set to continue into 2019”.
Deloitte research manager Bo Glowacz said: “On average, smaller schemes have been built especially in the West End compared to the City. We are, however, at a 14-year high in terms of completions.”
Mike Cracknell, director in the capital projects advisory team at Deloitte Real Estate, said: “With 40 schemes totalling 4.2m sq ft completing this survey, this is the highest level of office space brought to market in over 14 years.
“2018 is witnessing unprecedented office completions and we are expecting almost 7m sq ft to be completed before the year is out.
“The 13 per cent decline in construction is therefore driven by these completions rather than any significant reduction in new starts.”
The City of London continues to dominate development activity in central London, accounting for 6m sq ft (51 per cent) of the capital’s office construction.
However, office space under construction in the City fell 13 per cent in the six months to September, largely as a result of completions totalling 2.3m sq ft.
The West End broke ground with 12 new schemes (754,000 sq ft) – the highest volume of new starts in the area since early 2015, increasing this submarket’s total to 1.7m sq ft under construction.
The only other central London submarkets to record new starts in Deloitte’s latest survey were Midtown (seven), South Bank (one) and King’s Cross (one).