(Bloomberg) -- Investors are committing to a record volume of new London office construction projects as developers race to upgrade older buildings to meet rising environmental regulations and customer demands.
Builders broke ground on 43 projects providing 5.1 million square feet of space in the six months through September, according to a survey conducted by Deloitte. That’s the most since the consultancy began collecting the data in its current form in 2005.
Demand for office space has become increasingly concentrated on the best, greenest space over the last few years, as companies push to meet their own environmental targets and lure workers back after the pandemic-era shift to flexible working.
At the same time, policymakers have mooted banning landlords from renting out the worst emitting buildings, prompting developers to take action with upgrade projects even as the overall outlook for commercial workspace remains uncertain.
“Refurbishments continue to play a critical role in London’s development pipeline as the increasing need to modernize office space to avoid obsolescence grows,” Sophie Allan, a director in Deloitte’s real assets advisory unit said.
In total, there were 124 London office projects underway at the end of September, collectively set to deliver 15.7 million square feet of space. That represents a 9% increase in total construction volume from six months earlier. About 37% of the space under construction has already been leased.
Construction volumes took a hit during the coronavirus lockdowns, as developers put projects on hold and work took longer than expected, reducing the supply of new space. That’s encouraged more companies to commit to buildings even before they’ve started work to ensure they secure the best space.
“New builds have roared back from their post-pandemic nadir, which has likely been driven by large pre-lets and growing developer confidence in the demand for premium office space,” Allan added.
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