A new survey has revealed that London has started the highest number of office refurbishments in almost 20 years as employers look to attract staff to post-Covid premises.
Deloitte’s latest office crane survey found 37 office renovation plans, covering 3.2 million sq ft, started in the capital in the six months to March 2023.
This is the highest number and volume of renovation starts since Deloitte began collecting figures in 2005, the firm said.
One scheme, Citigroup’s 900,000 sq ft renovation of 25 Canada Square, accounted for a fifth of the volume in the latest survey.
Deloitte’s chief information officer for financial services and real estate, Margaret Doyle, said: “Following pandemic-induced work-from-home mandates, many companies are now encouraging in-office attendance more proactively and are considering how to attract employees to the office.
“The tenant shift towards quality over quantity has resulted in a desire for attractive, sustainable and well-equipped space, close to transport and service hubs.”
According to Deloitte, collaborative spaces, wellness rooms and “luxury coffee facilities” are being incorporated into newly designed spaces.
The increase was also partly attributed to the expected tightening of minimum energy efficiency standards, which will require office buildings to be EPC C by 2027 and EPC B by 2030.
Overall, the number of new office starts, which includes new construction and renovations, reached 50 in the six-month period. That compares with 31 starts in Deloitte’s latest survey, which spanned April to September 2022.
In terms of volume, there was a 76% increase compared to the previous survey. Starts totaled 4.4 million square feet in the latest survey, compared to 2.5 million square feet in the previous survey.
The overall uptick was likely due to “suppressed demand” caused by supply chain issues and labor shortages, Deloitte said.
Across London’s seven key areas, the West End led the way, with work starting on 1.31 million sq ft of space. Deloitte pointed to the West End’s “rich cultural amenities” as a reason why employers are focusing on the area.
The City, however, recorded a reduction in activity for the third consecutive survey, Deloitte said.
Looking ahead, Deloitte said completion delays meant around 10 million sq ft of office space is expected to be delivered during 2023. A recovery is being seen after several years of pandemic-related disruption.
However, Sophie Allan, director of Deloitte’s real assets advisory team, added: “While construction levels remain high, developers are very aware of high construction costs, which continue to being the biggest challenge, as both labor and material are seen as the main drivers.”
