Construction in Central London is on the increase – according to the latest London Crane Survey by Deloitte Real Estate, which shows that construction in the city has hit a 4-year high.
Commercial development is up eight per cent over the last six months with 9.7 million sq ft of office space currently under construction.
Deloitte says this has led to Developers and occupiers becoming are more upbeat and tenants have also been agreeing more leases on new space.
In Q1 2013, 33% of space under construction was pre-let – the equivalent to six Shards, a sharp contrast to 2011 when only 1% was pre-let, all of which highlights the strength of the capital’s economy.
In the city, nearly 4.5 million sq ft is now under construction, up 10 per cent since last November.
Developers in the West End were fast to react to improving conditions following the low level of completions in 2011, and as a result this year will see 1.6 million sq ft complete, the highest level for seven years.
Mayfair is set to see the largest influx of space for several years with 400,000 sq ft delivered this year but, according to the survey, the primary focus for new development is the areas of the West End outside Mayfair. North of Oxford Street and Victoria particularly are emerging as attractive locations with developer confidence driving construction activity and occupier demand driving rental rises.
The survey also shows that there is real momentum in some of London’s smaller office submarkets. King’s Cross has seen the biggest increase in new floorspace, up 68 per cent since the last survey. Attracted by Crossrail and infrastructure investment, Midtown now has 722,000 sq ft under construction, Southbank 982,000 sq ft, and King’s Cross 800,000 sq ft.
Anthony Duggan, partner and head of research at Deloitte Real Estate, said: “The increase in construction and leasing transactions recorded in the latest survey reflects the improving sentiment being felt in the London office market.”
He added: “This positive sentiment is backed up by the latest Deloitte CFO Survey which recorded a ‘striking broad-based’ rise in confidence among the UK’s largest businesses. We believe that, barring any further major economic shocks, this rising optimism is likely to translate into increasing tenant leasing activity later this year and further new developments breaking ground.”