London Office Crane Survey Construction activity boost. Winter 2015

Transcription

1 London Office Crane Survey Construction activity boost Winter 2015

2 Contents The report 1 Key findings 2 Submarket snapshots 4 Crane Survey results 13 Outlook 22 Development table 30 Contacts 36

3 The report What? A report which measures the volume of office development taking place across central London and its impact Where? London, covering the central office markets: City, West End, Docklands, King s Cross, Midtown, Paddington and Southbank Who? Developers building new offices or undertaking significant office refurbishment of 10,000 sq ft + When? 1 April 2015 to 30 September 2015 How? A team of researchers have walked every street in central London to monitor office construction. Our field research is then verified with direct industry links and in-house property experts London Office Crane Survey 1

4 Key findings 2

5 Key findings Crane Survey results Office construction is up 18% over the past six months to 11.1 million sq ft 2.5 million sq ft of new office space completed in 2015 so far 26 new schemes have started totalling 3 million sq ft, which is above the 10 year average 38% of space under construction is already let The TMT sector continues to lead leasing activity of new space Tenants in expansion mode as they take more space Outlook Volume of new space completed in 2015 expected to be the lowest since 2012 Over half of the space under construction scheduled to complete over the next 15 months Institutions are now developing the most new space Rise in demolition levels to 6.4 million sq ft indicates more construction is imminent Low vacancy rates will fuel further pre-letting activity TO LET Further upward pressure on rental levels London Office Crane Survey 3

6 Submarket snapshots 4

7 Submarket snapshots Central London Central London office development pipeline Million sq ft Completed u/c available u/c let Total amount under construction Today: 11.1 million sq ft Total amount completed this survey 1.4 million sq ft across 20 buildings Highest 19.5 million sq ft (2002) Lowest 2.7 million sq ft (2010) Construction is up by 18% from six months ago. Number of new construction starts Today 26 Volume of new space continues to rise higher than the 2011 high point 10 year average 19 Highest 37 (2007) Lowest 4 (2010) Total amount of space under construction which has been let 38% let 0% 100% Which sector is currently taking the most space? Average size of a scheme 144,500 sq ft TMT Average size of a floor 13,000 sq ft Number of cycle spaces being built 10,477 London Office Crane Survey 5

8 Submarket snapshots The City City office development pipeline Million sq ft Completed u/c available u/c let Total amount under construction Today: 5.7 million sq ft Highest 8.2 million sq ft (2008) Number of new construction starts Today 13 A 30% rise in the number of new starts. Highest 20 (2007) Which sector is currently taking the most space? TMT Average size of a scheme Lowest 1.3 million sq ft (2010) Construction volumes have risen by 26%. 10 year average 7 Lowest 0 (2010) 196,000 sq ft Average size of a floor Total amount completed this survey 0.8 million sq ft across 8 buildings Total amount of space under construction which has been let 40% let 0% 100% 14,000 sq ft Number of cycle spaces being built 4,562 6

9 Submarket snapshots West End West End office development pipeline Million sq ft Completed u/c available u/c let Total amount under construction Today: 2.4 million sq ft Construction volume up 5%. Highest 3.4 million sq ft (2007) Lowest 0.7 million sq ft (2010) Total amount completed this survey 0.3 million sq ft across 10 buildings Number of new construction starts Today 4 Number of new starts down by two-thirds from six months ago 10 year average Total amount of space under construction which has been let 31% let 8 Highest 13 (2011) Lowest 2 (2009) 0% 100% Which sector is currently taking the most space? Average size of a scheme 100,700 sq ft TMT Average size of a floor 13,000 sq ft Number of cycle spaces being built 2,889 London Office Crane Survey 7

10 Submarket snapshots Docklands Docklands office development pipeline Million sq ft Completed u/c available u/c let Total amount under construction Highest 7.4 million sq ft (2002) Today: 0.7 million sq ft Lowest 0 million sq ft (2014) Number of new construction starts Today 10 year average 0 1 Highest 1 (2012) Lowest 0 (2015) Which sector is currently taking the most space? Average size of a scheme 688,000 sq ft Financial Average size of a floor Total amount completed this survey 0 sq ft Total amount of space under construction which has been let 41% let 0% 100% 26,400 sq ft Number of cycle spaces being built 864 8

11 Submarket snapshots King s Cross King s Cross office development pipeline Million sq ft Completed u/c available u/c let Total amount under construction Today: 0.5 million sq ft Construction volume rises by 38% with one new start Total amount completed this survey 0 sq ft Highest 0.8 million sq ft (2013) Lowest 0 million sq ft (2011) Number of new construction starts Today 10 year average 1 2 Highest 4 (2012) Lowest Total amount of space under construction which has been let 69% let 0 (2014) 0% 100% Which sector is currently taking the most space? Average size of a scheme 104,000 sq ft TMT Average size of a floor 11,000 sq ft Number of cycle spaces being built 646 London Office Crane Survey 9

12 Submarket snapshots Midtown Midtown office development pipeline Million sq ft Completed u/c available u/c let Total amount under construction Today: 1.3 million sq ft Highest 1.3 million sq ft (2014) Lowest 0.2 million sq ft (2010) Construction volumes up by 6% in six months Total amount completed this survey 0.3 million sq ft across 2 buildings Number of new construction starts Today 6 Same number of new starts as six months ago 10 year average Total amount of space under construction which has been let 41% Let 3 Highest 8 (2013) Lowest 0 (2010) 0% 100% Which sector is currently taking the most space? Average size of a scheme 95,500 sq ft Professional Average size of a floor 10,900 sq ft Number of cycle spaces being built 1,020 10

13 Submarket snapshots Paddington Paddington office development pipeline Million sq ft Completed u/c available u/c let Total amount under construction Today: 0.2 million sq ft Total amount completed this survey 0 sq ft Highest 0.9 million sq ft (2002) Lowest 0 million sq ft (2014) One new start boosts construction volume by 142% Number of new construction starts Today 10 year average 1 First new start since Highest 2 (2006) Lowest 0 (2015) Total amount of space under construction which has been let 0% 100% Which sector is currently taking the most space? Average size of a scheme 112,500 sq ft Average size of a floor 10,000 sq ft Number of cycle spaces being built 208 N/A London Office Crane Survey 11

14 Submarket snapshots Southbank Southbank office development pipeline Million sq ft Completed u/c available u/c let Total amount under construction Today: 0.3 million sq ft Total amount completed this survey 0 sq ft Highest 1.6 million sq ft (2014) Lowest 0.1 million sq ft (2010) One new start increases construction volume by 15% Number of new construction starts Today 1 First new start in over 12 months 10 year average 1 Highest 2 (2012) Lowest Total amount of space under construction which has been let 0 (2015) 0% 100% Which sector is currently taking the most space? Average size of a scheme 126,000 sq ft Average size of a floor N/A 14,700 sq ft Number of cycle spaces being built

15 Crane Survey results London Office Crane Survey 13

16 Crane Survey results Construction volumes up Total volume under construction per survey central London Million sq ft Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q3 Total volume under construction by submarket Million sq ft 11.1 Total The total volume of office space under construction is at a seven-year high The latest Crane Survey results show that the volume of office construction in central London has continued to rise, increasing by 18% over the past six months to 11.1 million sq ft. Activity is now comfortably above the 10-year average of 9.2 million sq ft and at the highest level since Crossrail signals new office starts At 73% of the total volume of construction, the City and the West End account for the bulk of activity. It is worth noting that, especially in the West End, a growing number of new developments are located away from the core in areas such as North of Oxford Street that are set to gain greater connectivity through the arrival of Crossrail. Similarly in Midtown, which will also benefit, construction volumes have increased further in this survey (6%). In fact, all but one London submarket (Docklands) has recorded an increase in construction in this survey. There has been a particularly notable rise (148%) in Paddington where two schemes are now under construction in a market that last saw any major development over five years ago City 2.4 West End 0.7 Docklands 0.5 King s Cross 1.3 Midtown 0.2 Paddington 0.3 Southbank

17 No summer slowdown: high number of new starts Hot on the heels of the 31 new schemes recorded in our last Crane Survey, six months on there has been little let up in pace, with 26 developments starting construction. These new schemes provide a further 3 million sq ft to the construction pipeline. The combined total of new space starting across these last two surveys is 7.5 million sq ft, the highest in over 13 years. The City continues to lead with 13 new starts in this survey, the highest since 2012, and with a combined total of 2 million sq ft it accounts for 66% of the space started across central London. Whilst not quite reaching the recent peak of 2011, the current level is double that of the 10-year average. The six new construction starts in Midtown equal the number recorded six months ago, although the volume of space has decreased. Similarly fewer new construction starts have been reported in the West End and King s Cross. However, the smaller markets of Paddington, Southbank and King s Cross have all seen new starts this survey. Volume of new starts per survey central London Million sq ft Q Q1 Average volume of new starts 2003 Q Q Q Q Q3 Source: Deloitte Real Estate 2006 Q Q Q Q Q Q3 Winter 2015 Office space under construction Total sq ft 2009 Q Q Q Q3 Let sq ft 2011 Q Q Q Q Q Q Q Q Q Q3 Available sq ft City 5,685,300 26% 2,302,300 6% 3,383,000 43% West End 2,416,000 5% 745, % 1,671,000 0% 0% 0% Docklands 688, , ,000 King s Cross 520,500 38% 359, % 161,500 Midtown 1,338,000 6% 543,000 5% 795,000 7% Paddington 225, % 0 0% 225, % Southbank 252,000 15% 0 0% 252,000 15% Total 11,124,800 18% 4,229,300 21% 6,895,500 16% -14% -24% Change since last survey London Office Crane Survey 15

18 Top 10 developers by office space under construction across central London Developer Rank Brookfield 1 Land Securities 2 Canary Wharf 3 Stanhope 4 Great Portland Estates 5 King s Cross Limited Partnership 6 Derwent London 7 Blackstone 8 WRBC Development 9 Oxford Properties 10 Largest building to have completed in this survey Alphabeta, 14 Finsbury Square City: 220,000 sq ft The shift in developers continues Our recent Crane Surveys have highlighted the gradual shift away from property companies developing space towards other types of developers. As we continue out on an upward trajectory of new development, this shift continues to play out in our latest results. Institutions now account for 39% and their quantum of space is up by 16% to 4.4 million sq ft. As schemes by property companies start to complete and fall out of the Crane Survey, this trend will become more prominent. This is already evident in the ranking of the current list of top developers (ranked by volume of space under construction) to deliver the lowest level of completions in three years As previously predicted the level of completions in 2015 will not come close to the volumes seen in Our estimates of six months ago have now been reined in a little further, as we now expect just 3.3 million sq ft to complete in A move in completion dates has beset a number of schemes, pushing them into 2016, and having only recorded 2.5 million sq ft this year so far, the picture is one of low supply for This is exacerbated by the strong letting activity on those schemes left to complete this year, reducing the amount available to just 32% or 272,000 sq ft. This comes at a time when the level of available office space in the market has maintained its downward course throughout 2015 and is now at its lowest level in 14 years. 16

19 However, as a result of some delayed development schedules and developers responding to a dearth of supply by kick-starting refurbishment projects, the level of completions predicted for 2016 is already in excess of 5 million sq ft, which is above the average level of Grade A take-up across central London. Our research shows that the next 15 months will see over half (56%) of the space of new starts complete. The window for pre-letting is now wide open 4.2m sq ft of space under construction has already been let up 21% from our last survey. Although the percentage share of let space is at 38% (up from 37%), the rise in the total volume of space under construction has lessened the visible increase. Businesses have taken the opportunity to commit themselves to new space, in a market that is continuing to see a tightening of supply in the short-term. This is evident in the recently completed schemes, where 69% of space has already been let. Largest new start 100 Bishopsgate City: 867,000 sq ft London Office Crane Survey 17

20 Percentage of spaces let by sector TMT 44% Financial 27% Corporate 9% Professional 7% Legal 5% Government 4% Other 2% Insurance 2% TMT sector drives leasing activity The TMT sector remains the most dominant in taking new space. Of the space that has been leased either as a pre-let or during construction, TMT businesses account for 44%, equating to 1.8 million sq ft. The financial sector, which comes in second with 27%, has increased its share on six months ago, when it stood at 25%. Yet if we look at the wider leasing activity of all office space, not just what is under construction, the financial sector is the largest followed by the corporates. As availability of supply reduces further over the coming months, it is likely that we will see some requirements from financial firms fulfilled by taking space under construction. Reason for occupier movement More space Consolidation more space Consolidation less space New entrant 31% Whilst the TMT and financial sectors have taken the most new space, other businesses such as professional, legal and corporate have all recorded double digit growth in floorspace taken between surveys. Tenants are moving from a combined 2.3 million sq ft to 4.2 million sq ft 63% 4.2m sq ft 2.3m sq ft 5% 1% Source: Deloitte Real Estate 18

21 Businesses in expansion mode For much of the past year, results from Deloitte s quarterly CFO surveys have shown that UK corporates have been raising their expectations for hiring. This sentiment is reflected in our latest Crane Survey results, which show that businesses leasing space continue to be in expansion mode. Tenant movement City Total number of deals 14 Moved in 4 Moved out 1 Stayed 10 Net submarket deals 13 Analysing those tenants and their reasons for taking space, 63% are taking more space as a result of consolidating various sites they currently occupy. A further 31% are taking expansion space. This has been an increasing trend since Q1 2014, when this reason accounted for just 18%. In fact, considering all the deals, tenants are moving from a combined 2.3 million sq ft to 4.2 million sq ft. The City strengthens its attraction for tenants Over the past couple of years we have been looking at the tenant movement of those that take space in the new developments. We have clearly identified that the City consistently retains the majority of its businesses as they move around the EC postcodes. Observing more closely, some of these firms are moving to the Tech belt, away from the core to the Shoreditch/Old Street area. This is strengthened when looking at the recently completed schemes: six out of eight schemes were located in the Tech belt, amassing 13 tenant deals between them, as opposed to just four elsewhere in the City, of which it could be argued some are closer to Midtown. Nevertheless, smaller locations have also become popular as is evident with King s Cross and the regeneration of Victoria. West End Docklands King s Cross Midtown Total number of deals 9 Total number of deals 1 Total number of deals 3 Total number of deals 6 Moved in 4 Moved in 1 Moved in 3 Moved in 2 Moved out 2 Moved out 0 Moved out 0 Moved out 2 Stayed 5 Stayed 0 Stayed 0 Stayed 4 Net submarket deals 7 Net submarket deals 1 Net submarket deals 3 Net submarket deals 4 London Office Crane Survey 19

22 The tech belt Construction keeps pace with demand WATERLOO BRIDGE FARRINGDON ROAD STRAND HOLBORN LANE FETTER VICTORIA EMBANKMENT STAMFORD STREET ST JOHN STREET LUDGATE BLACKFFRIARS BRIDGE CITY ROAD HOLBORN HILL GOSWELL ROAD SOUTHWARK STREET CENTRAL STREET GOLDEN STREET BEECH STREET OLD STREET OLD STREET LONDON WALL CHEAPSIDE VICTORIA EMBANKMENT MILLENNIUM BRIDGE CITY ROAD CANNON STREET EAST LONDON BRIDGE ROAD Tech belt The City LONDON WALL OLD BROAD STREET COMMERCIAL STREET BISHOPGATE HOUNDSDITCH LEADENHALL STREET KINGSLAND ROAD BETHNAL GREEN BRICK LANE LEMAN STREET ROYAL MINT STREET HACKNEY ROAD GOSSET STREET ROAD VALLANCE ROAD CABLE STREET THE HIGHWAY Over recent years the attractiveness and subsequent migration of businesses to areas such as Old Street has been well documented. Typified by technology and media start-ups, the area is now home to some of the most innovative firms in the industry. The surrounding locations have, in turn, increased in popularity among businesses feeding off and into this developing location. It is these areas that have traditionally been the fringes of the main central London submarkets. In order to understand the area s dynamics, and particularly the construction activity, we have created a tech belt layer to our data. The adjoining map and snapshot profile highlights the tech belt, an arching area that takes in northern parts of the City, reaching west to King s Cross and eastwards towards Aldgate. Analysis of our Crane Survey database shows that 2015 and 2016 will deliver close to 2 million sq ft of new office space in this area, significantly above the annual average level of completions of 260,000 sq ft. This survey shows that 0.5 million sq ft of office space has completed over the last six months, of which 81% of space was let prior to completion. Marginally lower, the current level of leasing activity on schemes under construction is running at 73%. Whether the current ramping up of construction in this area is the result of a mixture of occupier demand, investor/developer focus, and a shortage of supply elsewhere. Further activity is expected over the next few years. A number of schemes feature in our Crane Survey forecasts and we expect the pace of development to continue. 20

23 Tech belt development snapshot Tech belt office development pipeline Million sq ft Completed u/c available u/c let Total amount under construction Today: 1.0 million sq ft Highest 1.4 million sq ft (2015) Number of new construction starts Today 1 Highest 5 (2015) Which sector is currently taking the most space? TMT Average size of a scheme 10 year average Lowest 247,250 sq ft Lowest 0 million sq ft (2010) Total amount completed this survey 0.5 million sq ft across 6 buildings 2 Total amount of space under construction which has been let 73% let 0 (2014) 0% 100% Average size of a floor 18,845 sq ft Number of cycle spaces being built 937 London Office Crane Survey 21

24 Outlook 22

25 Outlook The next five years Overview The erosion of available office space continued throughout 2015, exacerbated by low levels of new supply and a high level of letting on completed space. Adding to the high volume of office space started in our last survey, the wave of new starts recorded in this survey will go some way towards alleviating the current shortage of Grade A space. Indeed, the past six months has seen the pipeline for 2016 bolstered by a further 1 million sq ft. In the short-term however, we still envisage a shortage of supply. We expect that tenants will continue to seek pre-completion lettings to secure space, reducing the amount becoming available to the market and, therefore rental levels could still be subject to further upward pressure. We see this enticing developers to start further developments. Our analysis of future schemes not yet under construction shows that delivery of space in may exceed the long-run average and act to slow rental growth in these years. However, we are also mindful of potential capacity constraints that could affect the timing or cost of delivery of some schemes in the pipeline. Central London development pipeline Million sq ft Average Grade A take-up 2006 Completed u/c available u/c let Source: Deloitte Real Estate London Office Crane Survey 23

26 Central London availability levels by grade Million sq ft The occupier market remains active Take-up in central London in 2014 was the highest in eight years, and whilst leasing activity in 2015 has not quite matched it, demand remains reasonable. In the first three quarters of the year, the volume of Grade A space taken was slightly below the 10-year average, but with several schemes under offer, it could move above by the end of the year. Central London availability continues to slide At the end of Q3 the availability ratio had reached its lowest level in 14 years at 3.9%, with notable drops in the Southbank, Docklands and City markets Q3 Grade A Secondhand New supply this year has done little to improve availability: the latest Crane Survey shows that over two thirds of space completed in the last six months had already been let. As we predicted in 2013, both preletting and early-letting activity on future space would temper the amount of new space actually hitting the market. Consequently, some tenants are seeking precompletion lettings to secure space for requirements that may not be due for a number of years. Given the low volume of space delivered in this Crane Survey, we expect these dynamics to continue in the short term, and occupier choice to remain constrained. 24

27 Shift in occupiers leasing space The latest Deloitte CFO Survey points to a hardening of sentiment towards corporate expansion and capital expenditure, which could trickle through to leasing decisions on new space. Our research shows that this has not yet been the case, with letting activity increasing on new space, both completed and under construction. Indeed, the results of the Crane Survey show that while firms may be using office moves as a means to consolidate various sites, in the process they are also taking more space, as they factor in room for growth. Nevertheless, we are seeing a shift in the type of businesses seeking to occupy new office space in London. The financial sector is in a period of farreaching and fundamental change, as we explored in our recent report London Business Footprint: The evolving financial sector. On the other hand, the TMT sector has gone from strength to strength since the financial crisis. According to recent data from London & Partners (the Mayor of London s investment company), investors have invested 1bn into London s tech sector in The FinTech (financial technology) sector has raised 362 million this year. Technology has become a driving component of recent economic growth and as such we expect this sector to remain a leading occupier for office space. How much will be delivered from current construction? The increase in construction activity recorded in our latest survey is now starting to reshape the delivery pipeline, particularly for Whilst the volume of space under construction has increased, so too has the level of letting activity on this space 38% is already let since our last survey. There is still only a single scheme due for completion in both 2018 and 2019, but this is unlikely to remain the case for much longer. A number of factors currently at play suggest that our next Crane Survey could see a further significant uplift in activity. Central London development pipeline forecast Million sq ft Completed u/c available u/c let Agreed let not yet started Forecast speculative Forecast pre-let Average annual delivery Source: Deloitte Real Estate London Office Crane Survey 25

28 Rising demolition clears the way for construction In the past few surveys we have reported on the level of demolition activity that has been taking place, and have used this as an indicator of future construction starts. The amount of space under demolition has consistently hovered around the 5 million sq ft mark, but in this survey we have seen a 25% increase, taking the total volume of space being prepared to over 6 million sq ft. The findings are also supported by recent data on construction contracts from the Office of National Statistics. This shows that the volume of contracts awarded for new commercial construction in London has been increasing since 2014, with early indications showing that this rise continued through into Q There is a relatively strong correlation between this data and our own data on new construction starts (when lagged by nine months). Neither the rise in demolition activity nor the increase in construction contracts are absolute guarantees of a further uplift in new starts. Taken together, however, they certainly support our expectation of a sustained rise in new starts over the coming year. Demolition levels have increased by 25% since our last Crane Survey to Developers continue to target for delivery Our current Crane Survey results have shown that some schemes under construction and originally due to complete in 2015 are now drifting into early The same can be said for those schemes that have yet to start. Our analysis of the future pipeline shows that the outlook for development has shifted somewhat. The amount of space predicted to be delivered in the latter years of our forecast remains above the long-term average could see the highest volume of space delivered since However, it is our forecast for 2019 that has increased more significantly since our last survey. This is partly due to changing delivery dates, but also to the inclusion of new schemes. Similarly, schemes that require a pre-let could affect the pipeline as completion dates on these developments will be more flexible. Our data shows that 1.5 million sq ft of space has already been let but has yet to start construction. This is a something that we will continue to see as our forecast period starts to extend and tenants look further out to secure the right type of space. It is worth noting that the supply of future space continues to differ between markets with increased levels delivered sooner in the West End, whereas in the City it will come later in the forecast period million sq ft

29 Central London prime rental change by submarket: Q Mayfair/ St James North of Oxford Street Soho Victoria Covent Garden King s Cross Midtown City E1 N1 Canary Wharf Southbank Annual change 13% 0% 6% 3% 7% 19% 0% 3% 43% 25% 4% 18% 5-year change 53% 64% 55% 39% 45% 70% 21% 17% 150% 155% 10% 48% Rising rents outside of core areas A consequence of reduced availability has been strong rental growth that has not just been confined to the core submarkets of Mayfair and the City. Over the past year, offices in postcodes such as E1 and N1 have recorded double-digit growth. When looking over the past five years, growth in these postcodes turns to triple figures. Areas once thought as fringe have seen the strongest rental growth. Our data shows that developers have recognised this, with the list of potential new developments extending far beyond the traditional core markets. A good example of this is the tech belt an area that skirts around the traditional core of the City, covering an area from Pentonville Road in the west to Brick Lane in the east. Tenant demand has led to greater leasing, and increasingly, new developments. Current construction activity in the tech belt is buoyant, so much so that will see the highest level of new space delivered for over 13 years. The volume of space expected in 2016 is four times the average usually delivered, yet almost three quarters of the space is already let. What s more, there is significant scope for further development to take place in this area, with our database showing schemes that could deliver a potential two million sq ft of space by London Office Crane Survey 27

30 2017 rateable values are getting closer In addition to higher rents, the delayed rating revaluation now due in 2017 (based on April 2015 valuations) could well have a further impact on the operating costs of some office occupiers. The last valuation date for rating purposes was 2008 and the average increase in submarket rents in the period up to Q has been almost 50%, so some businesses could well expect substantial rate rises from This will be an important consideration for tenants that have active requirements for new space, and could shift the focus of their search more towards better value locations. In turn, this could be a further trigger for businesses to move between submarkets something that we have increasingly seen in recent years. Capacity constraints could impact the speed of delivery In addition to understanding when the volume of space completed might peak, we can also use our data to gauge the point at which the volume of space actually under construction could peak. This is important because our pipeline suggests construction activity could rise significantly over the next 12 months, and exceed highs last seen in This development will in part, however, depend on the ability of the construction industry to meet demand. Contractors reduced their capacity during the economic downturn, and some have been slow to rebuild it. This is already part of the reason that some schemes are being delayed, even before the increase in office construction that we predict has started to kick in. Meanwhile, London is seeing higher levels of development activity in the residential sector and on infrastructure projects, diverting capacity from the office sector. Labour pressures could emerge both for skilled trades as well as white-collar roles. Of course, many developers will have secured contractors for their future schemes, or be in the process of doing so, and thus removing this risk. And there is still time for contractors to raise capacity, as our data suggests the peak of construction activity will not be reached until Nevertheless, we are mindful of the potential for short-term capacity constraints to affect the cost or timing of some future developments. 28

31 Developing at the right time, in the right location The past six months have seen a further increase in construction, with activity rivalling levels last seen in Our forecasts suggest that the coming year could see construction activity rise still further, with both 2018 and 2019 now potentially delivering significant volumes of space. Nevertheless, with the amount of space currently under construction and due for completion in these years still low, there could be a first-mover advantage to be shared amongst developers that are able to commence projects imminently. As ever, the debate is whether the future supply will be either more or less than tenants demand. Our view is that this question really needs to be considered in terms of submarkets or even individual streets, such are the nuances of the different parts of the central London market. Indeed, tenants more flexible attitudes to the locations they will consider only reinforces this. Yet in aggregate, we believe that our current projections would not yet constitute a significant oversupply a view supported by the extremely low levels of current availability and the high degree of pre-completion lettings. The bigger picture, however, is that London remains an unrivalled attraction for global businesses. As we have discussed in detail in previous Crane Surveys, our research shows that it is home to the greatest number of high-skilled employees in the world, many of whom are working in parts of the economy in which London is a world leader, such as TMT and FinTech. Within Europe, London plays host to the highest number of corporate headquarters by far. Perhaps most importantly, London remains a location that is keeping abreast of change be it through infrastructure, growing business diversity or even office development. London Office Crane Survey 29

32 Development table 30

33 Development table Post code Developer Completion date Total space sq ft Space available sq ft No. Scheme Tenant City Under Construction 1 20 St Dunstan s Hill EC3 Forum Partners/Office Space in Town Office Space In Town Q , Fore Street EC2 The Salters Company The Salters Company, Undisclosed tenant Q , Finsbury Circus EC2 Mitsubishi Estate Company/Stanhope Q , ,000 4 Sutton Yard EC1 East City Investments Q ,000 75, Philpot Lane EC3 One Re One Re Q , King William Street EC4 Nippon Telegraph and Telephone Q , ,000 Corporation/Kajima Europe 7 The Monument Building,11-19 EC3 Skanska Q ,000 94,000 Monument Street 8 White Collar Factory, Old Street Yard EC1 Derwent London The Office Group, AKTII, BGL Group Q , , Cannon Street EC4 Morgan Capital Partners LLP Q ,500 88, Seventy Wilson, 70 Wilson Street EC2 Columbia Threadneedle/Stanhope/ Q ,000 70,000 Low Carbon Workplace 11 One Puddle Dock EC4 Network Rail Q ,000 60, Cannon Street EC4 Beltane Asset Management/ Q ,000 40,000 M&G Real Estate Carter Lane EC4 Columbia Threadneedle/Stanhope/ Q ,000 30,000 Low Carbon Workplace 14 Principal Place, Shoreditch High Street E1 Brookfield Amazon Q , Angel Court EC2 Mitsui Fudosan/Stanhope Q , , One Creechuch Place EC3 Helical Bar/HOOP/City of London Q , ,000 Corporation 17 Cannon Green House, Bush Lane EC4 Ocubis Q ,000 80, Alderman's House, Bishopsgate EC2 Amsprop Q ,000 65, Lime Street EC3 City of London Corporation Q ,000 35, Aylesbury Street EC1 Meritcape Alexander McQueen Q , Bloomberg Place EC4 Bloomberg/Stanhope Bloomberg Q , Central, 33 King William Street EC4 HB Reavis Q , , London Wall Place EC2 Brookfield/Oxford Properties Cleary Gottlieb Steen & Hamilton Q , , King William Street EC4 Beltane Asset Management/Angelo Gordon Q ,500 71, Dixon House, Fenchurch Street EC3 Greenoak Real Estate Q ,000 42, Lime Street & 27 Leadenhall Street EC3 WRBC Development WR Berkeley Q , ,000 (The Scalpel) 27 1 London Wall Place EC2 Brookfield/Oxford Properties Schroders Q , Fenchurch Avenue (120 Fenchurch Street) EC3 Generali Real Estate/Greycoat/CORE M&G Investments Q ,000 76, Bishopsgate EC3 Brookfield Q , ,000 Total 5,685,300 3,383,000 City Completed 30 Alphabeta, 14 Finsbury Square EC2 Resolution Property SEI Investments, Silicon Valley Bank, We Are Q ,000 Social, Maxus Global, Opentable, Mendeley, Virtual 1, Huckletree 31 2 New Ludgate EC4 Land Securities Mizuho Q , New Ludgate EC4 Land Securities Ropes & Gray, Commonwealth Bank of Q ,000 26,000 Australia, ZS Associates 33 C Space (Maple House, City Road) EC1 Helical Bar DLKW Q ,000 15, The Studio, The Bower, 211 Old Street EC1 Helical Bar/Crosstree Real Estate Partners John Brown Media Q , The Warehouse, The Bower, 211 Old Street EC1 Helical Bar/Crosstree Real Estate Partners Farfetch.com, CBS Interactive, Allegis Q ,000 12, Clifton Street EC2 Helical Bar/UBS Triton Property Q ,000 45, Back Church Lane E1 Boultbee Brooks Ltd Q ,000 24,000 Total 849, ,200 Red texts indicates a new start London Office Crane Survey 31

34 Development table No. Scheme Post code Developer Tenant Completion date West End under construction 38 Zig Zag Building, Victoria Street SW1 Land Securities Jupiter Asset Management Q , , Curtis Green Building, Victoria SW1 Metropolitan Police Metropolitan Police Q ,000 Embankment Total space sq ft Space available sq ft Welbeck Street W1 Aberdeen Asset Management Q ,000 70, Sloane Street SW1 The Cadogan Estate Marshall Wace Q , Yalding House, 152 Great Portland Street W1 British Land Q ,000 23, St James's Market, Regent Street SW1 The Crown Estate/Oxford Properties Q , , New Burlington Place W1 The Crown Estate/NBIM/Exemplar Davidson Kempner Capital Management Q ,000 62, St James's Market, Haymarket SW1 The Crown Estate/Oxford Properties Q ,000 67, Pall Mall SW1 SFL1 (Qatar National Bank) Q ,000 32, Welbeck Street W1 Howard de Walden Estates Q ,000 17, Bury Street SW1 The Crown Estate Q ,000 12, Nova South SW1 Land Securities Advent International, Egon Zehnder Q , , Colegrave House, 70 Berners Street W1 Arcadia Arcadia Q , Wigmore Street W1 Howard de Walden Estates Q ,000 55, Clarges House, 6-12 Clarges Street, and W1 British Land Q ,000 48, Piccadilly 53 Verde SW1 (Eland House, Bressenden SW1 Tishman Speyer Q , ,000 Place) 54 Nova North SW1 Land Securities Q , , Broadwick Street W1 Great Portland Estates Q ,000 87, Hanover Square W1 Aviva Investors Q ,000 40, Rathbone Place W1 Royal London Asset Management Q ,000 28, Rathbone Square, Rathbone Place W1 Great Portland Estates Facebook Q , Hanover Square W1 Morgan Capital Partners LLP Undisclosed tenant Q ,500 15, Dean Street W1 Great Portland Estates Q ,500 42, The Copyright Building, 30 Berners Street W1 Derwent London Q ,000 85,000 Total 2,416,000 1,671,000 West End Completed Savile Row W1 Terrace Hill/Aerium DSQUARED2 Q ,000 18, Soho Street W1 Dukelease Properties/British Airways St Ives Q ,000 7,000 Pension Trust Great Portland Street W1 Harmsworth Pooled Property Unit Trust Undisclosed owner occupier Q , Wimpole Street W1 Lazari Investments Q ,000 57, Air Street W1 The Crown Estate/NBIM Q ,000 47, Glasshouse Street W1 The Crown Estate/NBIM Undisclosed tenant Q , St James's Street SW1 Lothbury Investment Managers Vision Capital Q ,000 20, Market Place W1 CBRE Global Investors Q ,000 20, Bruton Street W1 Lancer Property Management William & Son Q , Welbeck Street W1 Howard de Walden Estates Q ,000 12,000 Total 250, ,000 Docklands Under Construction 72 1 Bank Street E14 Canary Wharf Société Générale Q , ,000 Total 688, ,000 Docklands Completed Total 0 0 Red texts indicates a new start 32

35 Development table Post code Developer Completion date Total space sq ft Space available sq ft No. Scheme Tenant King's Cross Under Construction 73 Pivotal, 123 Pentonville Road N1 Monteagle Barlow Trust Ltd Houzz Q , Lighthouse, Pentonville Road N1 UK Real Estate Ltd Q ,500 16, Three Pancras Square N1C King's Cross Central Limited Partnership HAVAS Q , Four Pancras Square N1C King's Cross Central Limited Partnership Universal Music Q , R7 Handyside Street N1C King's Cross Central Limited Partnership Q , ,000 Total 520, ,500 King's Cross Completed Total 0 0 Midtown Under Construction New Fetter Lane EC4 Great Portland Estates Bird & Bird Q , Shaftesbury Avenue WC2 Dolford Property Holdings Bank of East Asia Q ,000 47, Audit House, 58 Victoria Embankment EC4 FORE Partnership NESTA Q , Lacon House, 84 Theobalds Road WC1 Blackstone Q , , Holborn Tower, High Holborn WC1 Private overseas investor Q ,000 25, Strand Bridge House, Strand WC2 Banco de Oro Banco de Oro Q , Bloomsbury Plaza, 2-8 Bloomsbury Street WC1 Friends Life Q ,000 21, New Street Square EC4 Land Securities Deloitte Q , LSQ London, 48 Leicester Square WC2 Old Park Lane Management Q ,000 95, Fetter Lane EC4 Blackstone/Morgan Capital Partners LLP Macfarlanes Q , Chancery lane EC4 Viridis Real Estate Q , , The Cursitor Building, 35 Chancery Lane WC2 Aberdeen Asset Management and Endurance Land Q ,000 66, Salisbury Square EC4 Greycoat/Cheyne Capital Q , , One Bedford Avenue/ Tottenham WC1 Exemplar Properties Q ,000 70,000 Court Road Total 1,338, ,000 Midtown Completed 92 Adelphi, 1-11 John Adam Street WC2 Blackstone ACCA Q , , Chancery Lane WC2 Derwent London Publicis Groupe Q ,000 Total 257, ,000 Paddington Under Construction Eastbourne Terrace W2 Land Securities Q ,000 93, Kingdom Street W2 British Land Q , ,000 Total 225, ,000 Paddington completed 0 0 Total 0 0 Southbank Under Construction 96 South Bank Tower, Stamford Street SE1 Hermes/Canada Pension Fund Q , , Valentine Place SE1 South Square/Gemaco Q ,000 28,000 Total 252, ,000 Southbank Completed 0 0 Total 0 0 Red texts indicates a new start London Office Crane Survey 33

36 3 BELSIZE ABBEY ROAD ROAD B507 B GROVE E ND FINCHLEY ROAD A 41 AVEN U WELLINGTON ROAD ILBURN HIGH ROAD A5 MAIDA VALE EDGWARE A5 E ROAD B525 PRIMROSE HILL A5205 PRINCE ALBERT ROAD A5205 ARM ROAD PALKWAY ALBANY D E A503 CA MDEN R LANCY STREET CAMDEN STREET EVERSHOLT STREET A4200 A5203 CALEDONIAN ROAD (M ) R O AD LISSON GROVE CLIFTON GS ST JOHNS WOOD ROAD A 40(M) A4 0(M ) B507 MARYLEBONE FLYOVER MARYLEBONE ROAD A501 GLOUCESTER PLACE PORTLAND P LACE HAMPSTEAD ROAD ST PANC COLLEGE STREET RAS WAY YORK WAY A5200 YORK WAY PENTONVILLE ROAD A K 73 LIVERPOOL ROAD B515 1 WESTBOURNE GROVE BAYSWATER ROAD A40 BAYSWATER ROAD A40 ENSINGTON HIG H GLOUCESTER ROA CRAVEN HILL KENSINGTON GARDENS STREET Under construction BISHOPS BRIDGE RD PRAED STREET A4205 A315 KENSINGTON GORE A4 Completed SUSSEX GS A4209 PARK ROAD A41 HYDE PARK BROMPTON ROAD A4 SEYMOUR KNIGHTSBRIDGE PO NT REGENT S PARK S LOANE STREET A3 41 BAKER STREET A41 MARYLEBONE HIGH ST ST WIGMORE STREE T MORT OXFORD PARK LANE A4202 PARK LANE A4202 A315 STREET STREET 47 BROOK STREET GROSVENOR STREET MOUNT ST GROSVENOR PL BELGRAVE PL ECCL ST CURZON REBRESSENDEN STREET A4201 GREAT PORTLAND ST REGENT STREET VA EUSTON ROAD A501 GOWER STREET TOTTENHAM COURT ROAD IMER STREET OXFORD NEW BOND STREET ST JAMES 70 A4 PICCADILLY A4 A LACE ROAD 52 GREEN PARK BUCKINGHAM GATE / STREET WARDOUR ST 55 43/45 HAYMARKET BIRDCAGE WALK VICTORIA STREET A302 TER RW SHAFTSBURY ST PALL MALL A4 ST JAMES'S PARK 91 CHARING CROSS BLOOMSBURY GREAT SMITH ST H O 79 AVENUE ROAD JUDD STREET SOUTHAMPTON ROW 84 BLO OMSBURY WAY ENDELL ST GRAY'S INN ROAD KINGSWAY IN G'S GUILFORD STR EET C R O SS ROAD FARRINGDON ROAD THEOBALDS ROAD L B ORN HIGH HOLBORN HOLBORN VIADUCT WHITEHALL 82 MILLBANK 39 STRAND 92 VICTORIA EMBANKMENT 81 A3211 ALDWYCH 83 WATERLOO BRIDGE WESTMINSTER BRIDGE LAMBETH PALACE RO A D FLEETSTREET ROSEBERY AVENUE LANE HATTON GDN FETTE R EMBANKMENT A3 YORK ROAD LAMBETH PALACE STAMFORD STR WATERLOO ROA THE C WESTMINST E R BRIDGE LAMBETH ROAD A3203 NUE RE AD 2 CU 97 RO G

37 M A T ST JOHNS STREET FARRINGDON ST BLACKFRIARS BRG BLACKFRIARS ROAD UPPER STREEET ESSEX CITY ROAD A501 GOSWELL ROAD A1 4 0 B501 ROAD A104 PERCIVAL STREET CHARTERHOUSE STREET NEWGATE NEW NORTH ROAD A1200 SHEPHERDESS WALK B144 BUNHILL ROW BEECH A5201 LONDON WALL 11 UPPER THAMES STREET ET AD EORGE 31/32 LUDGATE 13 ROAD UNION STREET BOROUGH ALDERSGATE HILL QUEEN VICTORI A 11 SOUTHWARK RD ST SOUTHWARKBRID G E ROAD OLD STREET SOUTHWARK BRIDGE ROAD HARPER ROAD NEW A3200 BOROUGH STREET 2 23/27 GRESHAM ST CHEAPSIDE 9 STREET STREET HIGH 34/35 8 VESTRY ST CITY ROAD A501 MOORGATE CANNON ST GREAT DOVER STREET LO N DON BRIDGE A LOTHBURY S T R E E T PITFIELD THREADNEEDLE ST CORNHILL GRACECHURCH ST ST THOMAS ST LOWER LONG LANE A2198 OLD STREET EASTERN ST TOOLEY STREET BERMONDSEY STREET OWER BRIDGE ROAD A10 BISH O PSGATE FENCHURCH HOUNDSDITCH T HAMES STREET BRIDGE KINGSLAND ROAD A10 STREET ROAD INORIES HILL JAMAICA ROA ABBEY STREET GRANGE ROAD BETHNAL GRE COMMERCIAL STREET WHITECHAPEL TOWER BRIDGE HACKNEY BRICK PRESCO LANE B ROYA C B205 SALTER ROAD PL O U G HWAY GROVE STREET Definitions L I N K TUNN RIVER THAMES A1200 WESTFERRY ROA D A1200 CANARY WHARF MAST M A K E R WESTFERRY ROAD ASPEN WAY MARSH WALL R D ISLE OF DOGS SOUTH QUAY SPINDRIFT AVENUE Time period: April 2015 September 2015 Size minimum: 10,000 sq ft 72 MILL HARBOUR T R A LIME HARBOUR EAST FERR Y R OAD F A LGA A1261 R W AY PRESTON'S ROAD A1206 MILLWALL PARK MANCHESTER NNE L ROAD BLACKWALL TUNNEL BLACKWALL CROSSING B LACKWALL TUNNEL Construction type: New build construction or significant/comprehensive refurbishment work to have started, demolition stages not included Download the New London app To view the London development website visit: TUNNEL APPRO A CH With the future of London literally at your fingertips, the New London App is a must have for investors, property owners, developers or occupiers, within the UK and internationally. There is simply no other tool in the market with the capability to showcase London s offer in this way and it is set to revolutionise how the industry goes to market. London Office Crane Survey data now added. A102 London Office Crane Survey 35

38 Notes 36

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40 Contacts West End Rhodri Phillips Director City Steve Johns Director Investment Jamie Olley Partner Occupiers Chris Lewis Partner Author Shaun Dawson Research Manager Author Will Matthews Head of Real Estate Research Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited ( DTTL ), a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see for a detailed description of the legal structure of DTTL and its member firms. Deloitte LLP is the United Kingdom member firm of DTTL. This publication has been written in general terms and therefore cannot be relied on to cover specific situations; application of the principles set out will depend upon the particular circumstances involved and we recommend that you obtain professional advice before acting or refraining from acting on any of the contents of this publication. Deloitte LLP would be pleased to advise readers on how to apply the principles set out in this publication to their specific circumstances. Deloitte LLP accepts no duty of care or liability for any loss occasioned to any person acting or refraining from action as a result of any material in this publication Deloitte LLP. All rights reserved. Deloitte LLP is a limited liability partnership registered in England and Wales with registered number OC and its registered office at 2 New Street Square, London EC4A 3BZ, United Kingdom. Tel: +44 (0) Fax: +44 (0) Designed and produced by The Creative Studio at Deloitte, London. J3211