DEMOLITION in the City of London has increased as property developers make way for new schemes and scramble to meet the gap in supply.
According to the latest Deloitte London Office Crane Survey out yesterday, there was only one new construction start in the City over the last six months, which is Asia House on Lime Street. That is the lowest since 2010 and compares with nine the same time last year.
However, over three million square feet of demolition is underway as developers who shelved their schemes in the aftermath of the financial crisis return to their projects. A further 4.7m square feet is under construction in the City.
“It is astonishing that despite the property market sentiment, we’ve only seen one small new start in the City core since September,” said Deloitte’s head of transactions Matthew Elliott.
“It takes two years or more to deliver a building, so expect to see an under supplied market until 2017 – let’s hope the market doesn’t over compensate after that.”
Deloitte said a squeeze in supply together with the market recovery is likely to push rents up by four per cent a year over the next five years.
Rents for new offices range from £57.50 per sq ft to over £70 per sq ft.