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London Construction up by 18% According to Survey

Deloitte’s Winter Crane Survey has indicated that office construction in London is up 18% over the past six months, but a supply shortage looks set to take place.

The survey findings revealed that the volume of commercial space being constructed had gone up to 11.1m square feet for the reported period. This is a considerable increase over the 9.5m square feet recorded during the previous six months.

The Winter Crane Survey stated that building activity was now securely above the 10-year average of 9.2m square feet, and at its highest peak since 2008.

The bulk of the construction took place in the City and the West End, with a strong 73% of projects being worked on within these areas.

There was also an increasing number of new developments in London areas such as north Oxford Street. The survey stated that this activity was connected to Crossrail, which is scheduled to open in 2018.

Despite the impressive rise in construction activity, the Deloitte report’s conclusions indicated that there will be a supply shortage in the future, with the 3.3m square feet accomplished in 2015 being the lowest reported amount for three years.

Deloitte experts said that the situation was exacerbated by high levels of letting activity on those schemes left to complete in 2015, lowering the amount available to only 32%, or 272,000 square feet and applying more upward pressure on rents/

The survey also spotlighted possible constraints on capacity that the industry could face. These limitations could affect the scheduling and cost of delivering some projects currently in the pipeline.

Structural Defects Insurance

Will Matthews, head of real estate research at Deloitte, said that developers will remember the fact that this upward trend in office construction is taking place at the same time that residential and infrastructure development experience higher levels, increasing competition for available construction capacity.

Mr Matthews said that the increase in office development that the most recent crane survey recorded came about after five years of comparatively low delivery levels, which makes the current shortage of available stock even more of a problem.

He added that the new space will not be completed for awhile, and Deloitte forecasts additional upward pressures on rental activity throughout the short term.

The survey shows that beyond 2015-16, only one project is scheduled for completion in 2018-19, but Mr Matthews did not believe that this would be the case for much longer.

Demolition levels, which have routinely remained around the 5m square feet mark, has increased by 25% to 6.4m square feet.

Combined with data supplied by the Office for National Statistics, which indicated that commercial construction has been on the rise since last year and is likely to carry on into Q3 2015, the survey points to a sustained increase in starts during the coming year.


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