City office development fell sharply over the last six months, with the Square Mile pausing after 2017 saw the highest number of completions since the turn of the century.
Development activity dropped by 11 per cent, with 7.3m square feet of office space currently under construction. Only eight new schemes, representing 804,000 square feet, started during the six months to September, according to the Deloitte London Crane Survey released today. This is significantly lower than the 1.1m square feet average.
However, the drop off follows 3.4m square feet completing in 2017 so far, the highest volume to complete in the City since 2000.
“Developers in central London continue to take stock of the current market dynamics recognising a number of disrupting factors such as costs, Brexit uncertainty and the pace of workplace change," said Deloitte Real Estate's head of insight Shaun Dawson.
"We’re seeing a continued shift in timings for proposed schemes. With almost static levels of demolition hovering around 8m square feet, developers are showing some caution on where and when to deliver schemes to market.”
In contrast to the City, the West End registered an uptick in activity. Some 14 new schemes totalling 657,500 square feet have started construction, the biggest number of new starts recorded in a single crane survey for this submarket. Alongside existing activity, there is now 1.4m square feet being built across the West End – a 20 per cent rise on the last survey for the six months to May.
Construction costs are likely to rise as additional Deloitte research suggests a slower pace of workload and price rises over the coming year.
Director of capital projects advisory Michael Cracknell said:
In general, the workload sentiment for the next 12 months is expected to increase, but the level has reduced over the summer. Similar is echoed with regards to any rise in costs, contractors expect further increases albeit at a slower rate than previously witnessed.