As Brexit nears, new London office construction slows
LONDON (Reuters) – The number of new office developments in London is falling as higher construction costs and uncertainty over Brexit lead builders to delay new schemes, a closely-watched industry survey showed on Tuesday.
Construction began on 25 new central London office schemes in the six months ended Sept. 30, less than the 28 new construction projects started in the preceding six months, the London Office Crane Survey by Deloitte Real Estate showed.
The projects started over the surveyed period would add 1.8 million square feet into the development pipeline, the lowest new amount in more than three years, the survey added.
Although demand for office space has held up fairly well since Britain voted in June 2016 to leave the European Union, vacancy rates have begun creeping up, property prices have fallen and business have grown more cautious on investment.
“Developers in central London continue to take stock of the current market dynamics, recognising a number of disrupting factors such as costs, Brexit uncertainty and the pace of workplace change,” Shaun Dawson, head of insight at Deloitte Real Estate, said.
He said developers were showing “some caution on where and when to deliver” London office projects.
Land Securities, the developer of a large chunk of London’s offices over the past decade including the famed Walkie Talkie tower, said this month the slow pace of Brexit talks and uncertainty over the eventual outcome were leading to caution in the market.
The potential exodus of finance companies, major users of London offices, could further hurt market prospects.
A Reuters survey found that around 10,000 finance jobs will be shifted out of Britain or created overseas in the next few years. The Deloitte survey showed that of the space under construction, 45 percent had been pre-leased by finance firms and 2 percent by insurers.
The survey also said construction costs were likely to rise over the coming year, as it forecast a slower pace of workload and an increase in the price of building materials.