London sees slowdown in new office developments
London could face a further slowdown in office developments as firms reconsider the amount of space needed to house UK staff after Brexit, with new figures showing construction activity slowing in the capital.
The latest London Office Crane Survey by Deloitte shows that the total office space currently under construction fell by 6% over the past six months to 13.9 million square feet, down from 14.8 million square feet recorded in the last poll.
It found that total construction in the West End plunged 27% to 1.2 million square feet compared with six months earlier, marking its third consecutive fall, while the City saw a 7% drop to 8.2 million square feet over the same period.
Deloitte said the volume of City construction was due in part to a number of large projects coming to a close, adding that 10 new schemes are currently being developed.
Nigel Shilton, managing partner at Deloitte Real Estate, said: "The decrease in overall volume of space under construction could suggest that developers have slowed down, yet this is more a result of timing and two years of elevated levels of construction completing rather than developers holding off."
But the survey also noted that the "Brexit countdown will force some to assess property requirements" across London, while "political and economic uncertainty" will weigh heavily on demand.
A growing list of financial services firms have confirmed relocation plans following the Brexit vote, with HSBC moving 1,000 staff to France, AIG set to shift a string of executives to Luxembourg and Lloyd's of London opting for a subsidiary in Brussels.
JP Morgan earlier this week confirmed that it snapped up an office building in Dublin with the capacity to house 1,000 staff as it ramps up Brexit contingency planning. The US bank currently employs 500 workers in the Irish city.
Firms are hoping the moves will secure access to the bloc's single market for financial services after Britain leaves the EU.
The completion of a number of long-term projects led to a sharp increase in new office space overall, adding more than 3.9 million square feet over the last six months, marking the largest amount accounted for in a single Crane Survey since 2004.
Lettings of already-completed space is up 93% compared with six months ago, while 43% of under-construction office space has been rented.
Deloitte's survey is now forecasting that the delivery of new space in 2017 will be at the highest level since 2003.
Mr Shilton said: "Looking at the development pipeline, we forecast around 39 million sq ft to be delivered by 2021. Very few schemes have been cancelled, highlighting continuing developer confidence."