Office construction in the capital is set to stutter in 2018 before a strong rebound to levels not seen since the boom 27 years ago.
The upbeat post-Brexit outlook for office construction over the next five years was set out in the latest London Office Crane Survey, published today by Deloitte Real Estate.
The survey reveals that space under construction has dipped 6% over the past six months to 13.9m sq ft, the first drop in three years.
This slippage is expected to continue into 2018 before a strong rebound in office space under construction, reaching level seen in the last big peak in 1989-91.
The release of pent up demand from delayed projects will also depend on he type of Brexit deal won by the UK beyond the usual supply and demand indicators.
But Deloitte expects strong demand driving forward construction with the type of Brexit settlement only influencing the gear shift in pace of growth.
Nigel Shilton, managing partner at Deloitte Real Estate, added: “The decrease in overall volume of space under construction could suggest that developers have slowed down, yet this is more a result of timing and two years of elevated levels of construction completing rather than developers holding off.
He added that a further shift in timings would see a reduction in schemes in 2018, yet this drop in annual completions is expected to be short-lived.
“Demolition levels remain high at 7.9m sq ft, which chimes with the sentiment of our surveyed contractors who expect a rise in workload over the coming 12 months.
“Looking at the development pipeline, we forecast around 39 million sq ft to be delivered by 2021. Very few schemes have been cancelled, highlighting continuing developer confidence.”
“Development in 2019-20 has the potential to deliver the greatest volume of new space since the early 1990s.”
“While some schemes in the outer years of the forecast are liable to change their delivery dates, the current development pipeline clearly indicates five years’ worth of completions which are in excess of the average level of Grade A take-up, he added.