New report warns economic jitters could jeopardise London office pipeline
Half of the 150-plus office developments currently in the pipeline for central London may never go into construction, according to a stark warning from consultant EC Harris.
The firm said in a report today that much of the 53 million ft2 of office floor-space lined up for delivery by 2016 was in a “precarious” position, with projects struggling to attract “pre-let” tenants and external funding.
Some 60% of the floor-space in the pipeline is located in the City of London, reflecting the fact that developments in the Square Mile are on average around twice as big as those in other parts of central London.
The report said growth in the office pipeline had been directly driven by a reported 25-70 million ft2 in office space leases expected to expire by 2017, but it cautioned that the current economic climate could cause tenants to stay put.
In particular, it cited the euro crisis, diminishing tenant optimism, and tighter funding markets as reasons why occupants may choose to extend their existing leases, keeping those developments that need a significant “pre-let” waiting.
As Building reported last month, the high profile Pinnacle skyscraper (pictured), in the City of London, has been put on ice due to the failure to secure an anchor tenant.
Richard Taylor, head of commercial development at EC Harris, said projects needed to be even more focused on differentiation and creating a significant market advantage to maximise their chances of success.
“On paper, the development pipeline for London offices shows massive potential and investment,” he said.
“However, in reality the market is very different with a number of large projects unlikely to be delivered as they struggle to find pre-lets and external funding.”
A further finding of the report was the relatively low level of refurbishment space planned or in construction in central London – just 15% by area.