The completions of commercial developments are set to hit a peak this year while new starts show little sign of a significant fall, according to real estate advisor Savills' latest outlook report.
Central London requirements currently stand at 10 million square feet, up 41 per cent on the same period last year. Almost half of the overall quantum of this space is made up of occupiers with lease events into 2023 and beyond, indicating that occupiers will continue considering pipeline options.
Demand for newly developed or extensively refurbished space has led to pre-lets accounting for 22 per cent of space acquired since the first lockdown in March 2020.
The increased polarisation between best-in-class space and Grade B space is further illustrated by the fact that 88 per cent of leasing activity over this period has been of Grade A standard.
The hybrid effect?
Almost half of the pre-lets that have been exchanged this year are at least two years ahead of their scheduled completion, pointing to the importance that occupiers attach to the office.
Developers are confident given the appetite for newly developed products. Savills expects development completions for this year to hit a three-year high, with 5.5 million square feet scheduled for delivery by the end of this year. Development completions in the West End are set to reach their highest level on record, with 3.4 million square feet currently forecasted.
No significant slump to development starts in the Central London office market this year bodes well for developers, particularly in contrast with previous downturns. Savills said new starts are expected to be down by just 9 per cent on their average annual level over the past five years.