London Office Construction Jumps as Economy Spurs Tenant Deals
Developers are building the most offices in central London since 2008 as a brighter economic outlook motivates companies to look for new space.
New construction starts rose 18 percent in the past six months to 11.1 million square feet (1 million square meters) as London employment reached a record high and available office space remained near the lowest in 14 years, according to a report by Deloitte LLP on Tuesday,
“Developers have been playing catch-up to deliver the space the market requires,” said Shaun Dawson, a Deloitte researcher and one of the report’s authors. “There’s been a good recovery in economic sentiment.”
Office construction in the U.K. capital slowed sharply after the financial crisis, leading to a shortage of space that’s pushed up rents. Britain’s economy will grow 2.4 percent in 2015 and 2016, the Organization for Economic Co-operation and Development said on Monday.
More than 70 percent of the new offices are being built in the City of London financial district and the West End, with the Paddington area seeing the biggest increase, Deloitte said.
Technology and media companies were the biggest takers of space, signing for 44 percent of new buildings. Financial firms came in second with 27 percent. Royal Bank of Canada agreed to lease more than a quarter of Brookfield Property Partners LP’s 100 Bishopsgate tower in the City before construction is completed. The building is set for completion in 2018, RBC and Brookfield said in a statement last week.
Brookfield is the largest developer in central London, followed by Land Securities Group Plc and Canary Wharf, according to the report.