For many Londoners, zone one is somewhere they have not entered for over a year. For those who haven’t seen the West End and City since the first lockdown started in March 2020, here is a rough overview of what you may observe if you return soon: drastically less people in town than pre-pandemic, much less crowded tube carriages, and a big number of building sites.
Despite parts of the capital resembling a ‘ghost town’ during the Covid-19 crisis, recently the construction sector has looked very much alive.
According to property agent Knight Frank, some 5.8 million square feet of London office space is due to complete this year, of which close to 2.6 million square feet was started on speculatively, meaning it was built without a tenant lined up. In total the firm calculates over 3 million square feet of the space due to complete in 2021 is pre-let.
Construction completions in 2020 and 2019 were 4.7 million square feet and 4.6 million square feet respectively.
Work on plenty of the space under construction now will have started prior to the coronavirus outbreak, and ahead of the debate around offices and working from home becoming a serious topic for many companies for the first time.
Since last March a number of bosses have said they plan to embrace more flexible working post-pandemic, while some are looking to shed space. However, even with some commentary pointing to uncertainty around future office demand, a number of developers are planning to build more workspace this and next year.
Many property companies are convinced that firms will want the most modern and environmentally-friendly buildings in London for staff to come to, even if they are only in for part of the week. Landlords that could lose out are those sitting on older stock, where desk areas are more cramped in some cases.
In a month where there have been signs of footfall improving as lockdowns ease, here we look at a number of new office projects planned in the capital, and what developers think will be in demand.
The FTSE 250 landlord and developer says it committed to, or envisages, starting on site with 297,000 square feet of new developments this year, and another 130,000 square feet in 2022 subject to planning consent. Most of this will be office space.
This includes a £400 million development at 19-35 Baker Street comprising mostly offices, as well as shops and residential space.
The company, led by Paul Williams, says: “We are focused on providing the right product, embracing adaptable and generous office space, occupier wellbeing and sustainability.” It adds that the upcoming projects will be its fourth and fifth net zero carbon developments.
Property giant Landsec is currently on site with two developments totalling 279,000 square feet of office space it started speculatively in 2020. One (called Lucent) was started early 2020, and work began on a site called ‘The Forge’ shortly after. The latter comprises two office buildings totalling 139,000 square feet and a public courtyard set behind the Tate Modern at Bankside.
Marcus Geddes, the FTSE 100 firm’s managing director for central London, says: “Gone are the days when landlords can merely provide buildings which our customers then turn into offices. Today we need to work with our customers to create the right office environment and the right service that will support their success, providing tailored solutions for the various stages of growth businesses find themselves in and flexible spaces that draw in their talent.”
Mitsubishi Estate London
The company is involved in a number of developments in London, including at Warwick Court. It said in March that it and development partner Stanhope had started refurbishment work on the scheme at Paternoster Square. When complete, the building will offer over 180,000 square feet of mostly office space. Late last month, Baltimore-headquartered fund manager T Rowe Price said it has agreed to the heads of terms for up to 130,000 square feet of the space.
A spokesman for Mitsubishi Estate London says: “As ever, during times of change, we anticipate that there will be a flight to quality and the best businesses will actively seek out the best spaces as part of a commitment to innovation. As we are confident in the quality of our product, we believe that there will be sufficient demand to justify building speculatively.”
We believe that there will be sufficient demand to justify building speculatively.
Mitsubishi Estate London
Great Portland Estates
In a trading update earlier this month, the firm said it is “newly committed” to a major office refurbishment at 50 Finsbury Square (127,500 square feet).
In the same update Great Portland Estates’ chief executive Toby Courtauld said: "Prime offices and best in class flexible spaces continue to be highly sought after and in relatively short supply, both trends which we expect to persist.”
Investor and developer FORE Partnership got the green light in January 2020 to revamp a office building next to Tower Bridge into 110,000 square feet of office space. It said at the time there would be no fossil fuels used in running the property which will feature solar panels on the roof. It is working with development manager Landid on the Tower Bridge Court scheme and construction is set to start in July.
Basil Demeroutis, managing partner at FORE Partnership, says there is a shortage of “forward thinking, low carbon, design-led space that addresses the needs of the next generation of tenants – workspaces that foster health, wellbeing, creativity, collaboration, connectedness, community”.
Demeroutis adds: “These tenants want net zero buildings because that helps them meet their own environmental sustainability commitments. This focus on ESG is now a huge driver of decision making among businesses large and small and that in turn influences their approach to their workplace and what they want from it.”
He says: “Buildings that meet these needs are in such short supply, so there remains a tremendous opportunity as an investor, developer and landlord to create financial value by developing forward-thinking workplaces in central London. That’s why we have real confidence to bring forward speculative offices in the current market.”
As cranes remain part of the capital’s skyline, it looks like there are a number of firms demonstrating a vote of confidence in London. Rivals will be watching closely to see if the bet pays off.