New construction starts have jumped by a fifth in the six months ended March to 3.1 million square feet, Deloitte‘s London Office Crane Survey showed, with 56% of the pipeline expected to involve an extensive upgrade of existing office stock.
Lockdowns since early last year have forced millions of people to work from home, but easing restrictions are driving companies to chart a return with less hot desking, more room and better health regulations.
“Occupiers’ needs are shifting and buildings that meet their ESG principles while taking into account the welfare of their people are top of mind. Grade A, well-connected and eco-friendly office spaces, designed to maximise the benefits of new ways of working, will be the most desirable,” said Mike Cracknell, director in real estate at Deloitte.
The survey showed 4.5 million square feet of development has been delivered between October 2020 and March 2021, the highest level of completions in 18 years. In a sign of less speculative building, 59% of that was pre-let.
The survey also showed that the share of Technology, Media and Telecoms (TMT) pre-lets in all space under construction increased to 40%, reaffirming the importance of the TMT sector in the London leasing market.
Still, many companies have embraced work-from-home as a cost effective and flexible option that is here to stay, hurting demand for work spaces in London.
The city’s developers anticipate new working patterns to reduce office demand on average by 10% to 15% in terms of square footage.