(Reuters) – Office constructions in central London has slowed to a five-year low, sliding 10% from six months ago to 11.9 million sq. ft. of space, a survey showed on Monday.
The London Office Crane Survey by Deloitte Real Estate showed that construction of new offices in the last six months is down by nearly a half, from 3.5 million sq. ft. to 1.8 million sq. ft. in the previous survey.
The survey found that London continued to dominate construction activities with technology, media and communications and financial sector taking the most space.
“Today’s survey follows a three-year high of new construction starts, so these figures indicate a rebalancing of office development, rather than a worrying decline,” said Mike Cracknell, director at Deloitte Real Estate.
Cracknell said that 49% of space under construction had already been occupied due to the scarcity of ‘ready to occupy’ space.
The Deloitte report said developers are taking on large-scale constructions on the condition that these spaces are pre-let.
“Developer and investor sentiment for speculative building is definitely softening as pre-letting is fast becoming the prerequisite for starting construction,” Cracknell said.
The survey covered seven major central London office markets – The City, West End, Docklands, King’s Cross, Midtown, Paddington, Southbank – as well as three emerging submarkets – Vauxhall-Nine Elms-Battersea, White City and Stratford.
Developers interviewed for the survey were more pessimistic about the leasing market than six months ago, with 40% indicating that the leasing market was a ‘little worse’ in the third quarter, up from 27% in the first quarter, Deloitte said.
British construction activity shrank for the sixth month in a row in October, and at one of the fastest rates since the 2009 financial crisis, as Brexit worries and a general economic slowdown held back growth.
Britain had been due to leave the European Union on Oct. 31, but Brexit was delayed for the third time this year after Prime Minister Boris Johnson failed to get an exit deal through parliament in time.
Deloitte, a professional services firm, has been publishing its London Crane Survey for 23 years.
(Reporting by Samantha Machado in Bengaluru; Editing by Arun Koyyur)