London tech sector growth boosts construction boom
Construction in London is on the rise in response to the capital’s tech sector growth.
London’s booming technology scene has given the city’s economy a major boost, as it positions the capital as a national and European centre for innovation. But it’s also having knock-on effects for other industries – and a new report illustrates that it’s even stimulating the construction sector.
Deloitte’s latest London Office Crane Survey shows that there is now 3.7 million square feet of newly completed office space in the capital – the highest figure in ten years.
These completions might explain why the amount of office space still under construction has fallen over the past six months. Even so, 22 schemes began over the period, making up nearly twice the amount of space recorded in the last survey.
“With occupier demand expected to remain strong we foresee further increases in pre-letting activity, and demand for the best space to exceed new supply for the next three years,” said Steve Johns, head of city leasing at Deloitte Real Estate.
“Nevertheless, with over five million sq ft now being demolished – a rise of 18 per cent in six months – developers are racing against the clock to deliver buildings while new supply remains relatively low.”
Perhaps as a result, it is clear that there is high demand for the office space available – 41 per cent of the space still under construction is already let. What’s more, with the amount of new space available declining, the space that is available will be worth substantially more to its tenants.
Rents are therefore predicted to rise over the next four years – in the City, they will increase by 5.5 per cent over the course of next year alone. The West End will perform even better, with rents up by 8.7 per cent over the course of next year.
But one of the most promising areas for the construction industry has been around the capital’s famous Silicon Roundabout. Developers have started work on ten new schemes in the City during the six months to October, collectively comprising 1.6 million square feet of space.
Of those, five were on or near the fringes of the tech centre near Old Street, including Derwent London’s massive new White Collar Factory office and Helical Bar’s The Bower. Not only is the tech sector booming, it seems to be giving construction a helping hand.