Since the start of 2019, construction of 2.5 million sq ft of office development has started in Central London, according to Avison Young’s Q1 Central London research, relaxing the heavily constrained development pipeline, providing more options for larger occupiers.
The City development pipeline has seen a dramatic increase since the start of the year. At the end of Q4 2018, there was just 2.6 million sq ft of office space over 100,000 sq ft due for delivery post 2020, of which 45% was pre-let. This figure has risen to 4.8 million sq ft for Q1, of which just 27% is pre-let.
Key developments which commenced construction in The City in Q1 2019 include 6-8 Bishopsgate, Ropemaker Place and One Portsoken Street.
In comparison, the West End office development pipeline continues to be heavily constrained especially at the larger end of the market. Developments under construction over 100,000 sq ft total 4.5 million sq ft, of which a substantial 74% is pre-let. This has the advantage, however, of keeping rents stable in an uncertain market.
Nevertheless, occupiers increasingly see Central London as one market with a variety of potentially acceptable options.
Patrick O’Keeffe, Head of London Agency and Investment, Avison Young says: “We are currently seeing a market where the 10% of the larger development stock is not being replaced, resulting in a lack of choice for larger tenants. Developers are increasingly waking up to the opportunity of refurbishment, but with lots of uncertainty around pricing.
“The development starts in the City for Q1 2019 is indication of the confidence developers and occupiers continue to show in London.”