London has long been the bastion of growth, investment, and success in the UK. A truly international city with a reach far beyond the shores of our small island. However, like all of us, the city has not been immune to the ravaging affects of the pandemic, both social and economic, and with the introduction of Tier 4 restrictions, the impact looks set to continue.
Deloitte’s London Office Crane Survey Winter 2020, which analyses the London corporate real estate market, indicated that it is currently facing a ‘state of suspension’ as businesses reflect on the impact of the pandemic on ways of working, and what that will mean for office builds in the future.
The report indicates that new starts (new developments or significant refurbishments of 10 000 sq ft) are down by 50% following a record 2020 Q1, but in line with long-term average figures. An increased proportion of these new starts are going ahead on a pre-let basis, indicating a reduction in speculative builds in response to market conditions.
Interestingly, two thirds of new starts are refurbishments, highlighting the demand for Covid-safe workspaces with increased focus on space and ventilation. The number of second-hand properties has also increased significantly, as businesses review their need for office space and release properties.
Unsurprisingly, the volume of projects under construction remains high due to pandemic related delays, with completion of many projects anticipated in 2021.
Deloitte’s report predicts that the requirements for office builds will change, with the office becoming a hub for “collaboration, innovation, and creativity” that will work within the hybrid home/office working model that is gaining popularity. This will require a new approach from developers, and lead to a significant amount of redevelopment work in the competitive second-hand market.
However, some areas in the capital are showing increasing levels of positivity in relation to planned development. Figures from The City of London Corporation show that planning applications in the City are on the rise with seven per cent more applications received in November 2020 than in the same month the year previous. This area was badly impacted earlier in the pandemic with confidence in building projects greatly reduced as the majority of people moved to home working.
It is difficult to say what this latest phase of the pandemic will mean for this predicted activity, which include plans for transformative and cultural projects, including a new museum. With hopes still pinned on the vaccine offering a way out in 2021 much of the planned activity could still go ahead albeit with some delays.