London office starts plunged by nearly half between April and September

Office construction starts in London have crashed by 42% since April as developers hold fire on schemes amid continued economic uncertainty, the latest Deloitte crane survey has found.

Refurbishment schemes also plunged by 57% and have been outpaced by new build starts for the first time in four and a half years.

A total of 2.4 million sq ft of office space started on site between April and September across 25 schemes. This does not include life sciences, which was responsible for 35% of all new commercial starts during the period with a combined 3.7 million sq ft of space.

But even with life sciences included, total constructions fell by 12% on Deloitte’s previous survey for the capital, covering September 2023 to April 2024.

Two huge life sciences schemes boosted the figures for construction starts, Kadans’ One North Quay in the Docklands, designed by KPF, and Reef Estates’ Bennetts-designed Tribeca London scheme in King’s Cross.

These schemes are the main drivers of new activity in King’s Cross and the Docklands. New construction fell across the other central London submarkets, except for the City, where new construction activity edged up by 7%.

Philip Parnell, Deloitte partner and real estate sustainability lead, said the dramatic fall in refurbishment levels was likely a reaction to economic, geopolitical and wider global concerns prevailing during the survey period.

But he said developers’ appetite to maintain their pipeline of activity, coupled with the continuing need to address occupiers’ ESG credentials, suggested this may be a “blip rather than a trend”.

Meanwhile, 2.7 million sq ft of office space across 35 schemes has been completed in the capital, 28% less than the 3.8 million sq ft that was expected to be delivered.

For the third survey in succession, developers listed “planning issues” as a leading challenge to development. This survey also saw “construction costs” rising as a top challenge, while “supply chain issues” dropped down the list of concerns.

These delays have contributed to the record high levels of ongoing construction, currently standing at 16.8 million sq ft.

Deloitte partner and real estate lead Caroline Waldock said that despite the survey finding signs of stubborn optimism among developers, factors impacting completion levels would be likely to continue for the “foreseeable future”.

“It has been a challenging year for London’s office market,” she said. “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.” 

While she said activity in the life science sector could reinvigorate quieter markets in the short term, longer term demand for this space is “less certain”.

The report said it “certainly remains to be seen” whether the supply of bespoke life sciences space, which can only be occupied by life sciences companies, will exceed the demand for this type of space in the capital, which is considered a less mature life sciences market than the traditional hubs such as Oxford and Cambridge.