Office projects in the capital have slowed, according to the latest survey by consultants of construction activity.
New office construction in London has dropped by 12 per cent while refurbishments were down by over a half, outpaced by new-build starts for the first time in almost five years.
According to the latest Deloitte London Office Crane Survey, there were 344,000 square metres of new construction starts across 29 schemes, down by 12 per cent on the last survey six months ago, although volumes remained above the 10-year average of 316,000 square metres.
Life science schemes – made up of both laboratory and office workspaces – were responsible for 35 per cent of the new starts, driving the bulk of new activity in King’s Cross and the Docklands.
New starts in the Square Mile were up by 7 per cent. Elsewhere in the capital, new starts fell.
The survey, which is based on data collected between April and September, recorded 111,000 square metres in refurbishment starts across 18 schemes, a fall of 57 per cent.
The drop meant that for the first time in four and a half years, refurbishments were marginally eclipsed by the level of traditional office new-builds.
But a poll of developers conducted alongside the survey struck an optimistic note, with 92 per cent expecting their development pipelines to increase or stay the same over the next six months.
For the third time in a row, developers highlighted planning issues as a key challenge to development, with construction costs also raised as a significant problem.
However, supply chain issues showed signs of easing as a concern.
Caroline Waldock, partner and real estate lead at Deloitte, said 2024 had been a challenging year for London’s office market.
“Not only has it had to grapple with continued geopolitical and economic uncertainty, but construction contractor insolvencies have placed additional pressures on an already distressed construction sector,” she said.
Although activity in the life science sector had the potential to reinvigorate quieter markets in the short-term, demand for this space was less certain.
“Looking further ahead, the recent cut in interest rates and the easing of construction cost inflation could be crucial in boosting new scheme numbers,” she added.
“Our survey has recorded a renewed sense of positivity among developers that suggest the decreases we’ve noted may be short-lived.”
