Deloitte’s London Office Crane Survey sees the highest volume of new starts on record, with refurbishment starts breaking records for the second consecutive survey.
The UK’s capital has seen the highest volume of new office starts on record – with 5.1 million square feet (sq. ft.) of new construction starting across 43 schemes – according to Deloitte’s Winter 2023 London Office Crane Survey.
Refurbishment starts specifically have broken records for the second consecutive survey, comprising 34 schemes covering 3.3 million sq. ft. The increase in refurbishments has again been driven by the anticipated tightening of Minimum Energy Efficiency Standard (MEES) regulations, coupled with demand for premium grade office space which aligns with tenants’ own sustainability commitments and aspirations.
Sophie Allan, director in real assets advisory at Deloitte, said:
New builds have roared back from their post-pandemic nadir, which has likely been driven by large pre-lets and growing developer confidence in the demand for premium office space. Meanwhile, refurbishments continue to play a critical role in London’s development pipeline as the increasing need to modernise office space to avoid obsolescence grows. The future will see further skyscrapers added to the City’s skyline, with three large developments recently obtaining planning permission.
Developers anticipate that they will achieve operational net zero across their portfolios by 2040. However, developers highlighted the cost of construction as the biggest challenge in achieving net zero. With the Net Zero Carbon Buildings Standard (NZCBS) keenly awaited, when asked about the requirements for net zero put forth by the UK Green Building Council, developers listed limits on total Energy Use Intensity (EUI) as the most challenging requirement to achieve.
Philip Parnell, partner and real estate valuation lead at Deloitte, said:
Occupier focus on premium space, coupled with addressing the anticipated MEES deadline and drive to net zero, is continuing to provide a strong stimulus to refurbishment activity. This is a trend that is countering the backdrop of an otherwise challenging macro-economic environment.