New data highlights a slowdown in London’s office construction sector.
- Office construction in London fell by nearly 20% recently.
- Refurbishment projects have decreased by around 25%.
- Demand for upgraded office spaces remains strong despite setbacks.
- Economic uncertainties are affecting real estate developments.
In recent months, the construction of new office spaces in London has decreased significantly, with figures showing a reduction of nearly 20% compared to previous data. This decline is detailed in the latest survey by Deloitte, which tracked activity from October 2023 to March 2024, revealing that only 42 new office projects commenced during this period, a considerable drop from previous counts.
Refurbishment projects, too, have not been immune to this downturn, plummeting by approximately 25% as reported by Deloitte. Despite this reduction, refurbishment efforts remain promising, driven by the ongoing demand for premium office spaces and the need to upgrade facilities to comply with modern energy standards. According to Sophie Allan, Deloitte’s director of real assets advisory, the desire to modernise outdated premises will continue to fuel refurbishment activities over the coming decade.
While the number of new projects has dwindled, an unprecedented volume of office space, spanning 1.5 million square metres, is currently under construction. This staggering figure encompasses ongoing projects from previous surveys, indicating an extensive pipeline of future office space.
Economic uncertainties, characterised by high interest rates and inflation, as highlighted by Margaret Doyle, Deloitte’s partner and chief insights officer for financial services and real estate, have posed challenges to development timelines. This has led developers to adopt precautionary strategies, such as delaying contractor appointments until significant portions of projects have been leased, to mitigate risks associated with potential supply chain disruptions and market volatility. Doyle notes that such cautious approaches could potentially lead to a medium to long-term supply shortage.
Despite challenges, the London office market shows resilience with ongoing projects and future prospects.
