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Research by the commercial real estate advisor DTZ suggests that the scale of new office space being brought to market across the City has fallen from 3.71 million sq ft in 2009, to 2.5 million sq ft in 2010, with this year’s figure likely to almost halve as well because so few construction projects are being completed.
The lack of grade-A office space supply in the City is sure to send demand and costs on an upward curve even as a number of high-profile and large-scale building projects get underway in various parts of central London.
Major endeavours like The Cheesegrater, the Walkie Talkie and The Shard are getting well into gear but aren’t likely to be taking their first occupants for a while yet, with several of the most notable schemes having been delayed by the impact of the financial crisis in 2008.
Until supply can start catching up with demand, it looks as if there will be ever greater competition for the 3.5m sq ft or so of grade A office space that DTZ estimates is currently going unoccupied in London’s primary financial district, which is already one of the world’s most expensive places to rent offices.
“Pre-letting will be crucial not only because there will be a shortage of grade A space, but also because large units suitable for major occupiers are going to be in especially short supply,” Alistair Brown, a director of DTZ’s office agency, told the Telegraph.
The Cheesegrater office space tower, which is being developed jointly by British Land and Oxford Properties, will be located in the heart of the Square Mile and is currently scheduled for completion in the second quarter of 2014.
Meanwhile, The Shard is taking shape on the southern side of the Thames, close to but not in the City. It will be the tallest building in the European Union when it is completed at some point next year.
Editor’s notes: In 2022, the total take-up of office space in the City of London was 5.2 million square feet which was a 23% increase on the previous year’s total.
The largest office space deal of 2022 was Clifford Chance’s acquisition of 321,000 square feet at 2 Aldermanbury, EC2. This was a pre-let deal as the scheme is not due to complete until December 2025.
At the end of 2022, the level of office space in negotiation increased by 5% to stand at 1.5 million square feet with 45% of that being accounted for by pre-let stock and 35% for newly built or refurbished space.
At the same time, the total supply of space rose to 11.2 million square feet, reflecting an 8% increase compared to the previous quarter, due to a slowing down of leasing activity in the final quarter compared to Q3.