Latest News Wed, Nov 24, 2021 7:27 AM
The London Office Crane Survey Winter 2021 reveals dramatically improved confidence about London in the developments that are being undertaken in the office market.
The survey, compiled by Deloitte, shows the volume of new starts has increased from 3.1 million to 3.4 million sq ft, above the long-term average of 2.4 million sq ft.
The number of new starts has fallen: this means that the average scheme size has increased by 28% to 122,339 sq ft, arguably a sign of greater risk appetite.
The proportion of new builds, vs refurbishments, while still below 50% of the total new start volume, has increased to 46% of the total, from 33% in the Winter 2020 Crane Survey. The uptick in new builds over the past three surveys has not disrupted the emerging trend towards refurbishments, which we believe to be a structural shift that is happening for sustainability reasons.
Other key findings from the survey include:
The confidence of developers is growing with regard to the future of work agenda, based on an increasing body of research and experience about the evolving impact of hybrid working on the demand for offices. Collaboration in the real estate sector to address climate change issues is also helping to alter approaches to development, refurbishment and asset management. Nonetheless, responding to the risks associated with ’stranded assets’ through obsolescence is less well-advanced.
“During this survey period, the government lifted its ‘work from home’ guidance,” explained Michael Cracknell, Director at Deloitte. “Underground numbers show a gradual return to the office, with September weekday ridership at 65% of pre-pandemic levels.
“Deloitte’s latest CFO survey highlighted a slowing in growth in Q3, with finance leaders navigating labour and supply shortages. Despite various headwinds, they are focused on investment and growth and at how reducing carbon emissions can be incorporated into corporate strategy.
“The office market must respond to a complex and evolving business environment, with uncertainties around hybrid working, and the net zero imperative. This is not easy with an asset that takes years to plan and build. Developers are keen to avoid the obsolescence of second-hand stock we now see.”
The survey provides a detailed insight and answers a number of key questions. What impact do the latest office construction figures have on supply levels? How concerned are developers about leasing demand? Are rising environmental standards accelerating the obsolescence of secondary stock?
This year marks the 25th anniversary of the launch of the Crane Survey - then covering just the West End. In the anniversary edition Deloitte analyses the past six months of activity and the results from our Developer and Construction Market surveys as well as looking to the future pipeline.
To celebrate this landmark, it also asked industry leaders to reflect on the past quarter-century and to take out their crystal balls for the next.
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