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Central London office construction at near record level

Total office space under construction in London has hit 9.5m sq ft with 31 new projects starting in the last six months alone.

According to Construction News, the 31 new project starts recorded in Deloitte’s latest London Crane Survey in the six months to the end of March 2015 is well ahead of the 10-year average of 19, and only just behind the 2007 record of 37.

The volume of new starts by square footage is at its second highest point on record, only trailing Q1 2011.

In 2014 as a whole, 6.3m sq ft of office space was completed, representing another 10-year high.

All but two of central London’s submarkets have seen growth in the last six months.

The City has led the way with 10 new construction starts, accounting for 1.7m sq ft.

These developments also account for just under half of all pre-let development taking place in central London.

Elsewhere, the West End has seen a 24 per cent rise in activity, following 11 new starts in the last six months. The Midtown area has seen six new starts, equivalent to a 44 per cent growth in construction volumes.

But the survey also warns that levels of Grade A office space in the capital have fallen to “very low” levels.

The availability of office space has dipped from a peak to 10.1 per cent in 2009, and now stands at 4.9 per cent, with available Grade A space halving over this six-year period.

The survey also highlighted that 2015 will see below average levels of office completions, with 2018 seeing the next peak in office activity.

Currently, 14 months of office supply is under construction in the capital.

Commenting on the survey, Deloitte partner and head of real estate strategy Anthony Duggan said: “We are now seeing the start of the supply response the market has been expecting.

“All thanks to the robust economic conditions, strength of London as a global city, tight existing office supply and high levels of leasing deals being transacted. 

“However, this increase in activity will not come in time to alter the very tight supply dynamics the office market is currently experiencing.”

Mr Duggan added that he expected further rises in rents and more pre-let deals on schemes, following competition from tenants on “the limited amount of available space”.

“Looking further ahead, we expect the development pipeline to continue to increase as developer confidence translates to more active construction sites across London,” he said.

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