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London’s Potential £12billion Office Development Boom at Risk of not being delivered by 2016, EC Harris Reports

21 February 2012

  • Over 150 projects lined up which could deliver a potential 53 million square foot of gross office floor area by 2016
  • However 50% of the pipeline is at risk of not being delivered by 2016 due to lack of funding and pre-lets

A new report out today from EC Harris, the global built asset consultancy, reveals that the size of the London office development pipeline is unprecedented, with over 150 potential projects ready to deliver 53 million square feet of gross internal office floor space by 2016.  However; the report warns that many of the developments are in a precarious position with projects struggling to attract pre-let tenants and external funding which could see 50% never even reaching the construction site.

Where and what is the ‘notional’ pipeline
The report, entitled “London Office Development: The Challenge Ahead” confirms that the City of London remains the centre of attention for developers and investors alike, with over 60% of the total area (34m square foot gross internal area) and over 50% of the number of potential projects located there.  The average size of a City project is circa 420,000 square foot gross, nearly twice the size of those planned for the West End or Midtown, reflecting the large scale tower schemes that are planned or under construction such as 20 Fenchurch Street and the Leadenhall Building.

Midtown is characterised by smaller projects, with over 30 potential developments totalling 7 million square foot gross internal area on the pipeline.  In comparison, the West End pipeline is relatively restrained reflecting the greater planning challenges.  Nevertheless there are still 25 potential developments that could commence pre-construction or start on site over the next 4-5 years.  The average development size in the West End is 240,000 square foot gross.

Richard Taylor, Head of Commercial Development at EC Harris and author of the report said: “On paper, the development pipeline for London offices shows massive potential and investment.  However, in reality the market is very different, with a large number of these projects unlikely to be delivered as they struggle to find pre-lets and external funding.  To stand a chance for success, projects need to differentiate and create a significant market advantage if they are to maximise their chances of completion.”

Drivers for the pipeline and risks to delivery
The growth of this pipeline is directly driven by the reported 25-70 million square foot office space leases that are expected to expire before 2017.  However, the report identifies the euro crisis, diminishing tenant optimism and ever tighter funding markets, as key reasons for these tenants to potentially stay, ride the storm or extend existing leases leaving developments that need a significant “pre-let” waiting.   This means that, in order to succeed, projects need to be even more focused on differentiation and creating a significant market advantage to maximise the opportunity for success.

Low level of refurbishment space
One of the additional findings of the report was that there is only a relatively low level of refurbishment space planned or in construction, with only 15% of the pipeline by area classed as refurbishment space.  Midtown had the most refurbishment space as a proportion, at over 2.5m square foot gross, with only 12% of the pipeline in the City identified as refurbishment.

Improving chances for success
The report recommends that investors and developers address this challenging and competitive market by:

  • End user alignment:  Ensuring that projects are forward thinking and have the end user in mind, offering financial confidence about cash flow implications, flexibility to expand/contract in a volatile market, specifications that reflect the nature of the tenant’s business, high levels of sustainability and absolute certainty of delivery.
  • Funding alignment: It is a buyers’ market and funders are looking for optimum value creation, a long term approach that delivers a sustainable asset and total certainty about planning, costs, and delivery.  JV partnerships are also attractive as the greater the risk share the greater the chance of funding.
  • Commercial advantage:  developers and investors must focus on creating and delivering a competitive asset to create value for their tenants through maximising design efficiencies, achieving an optimum cost solution that takes into account the whole life cycle of the asset and a cash flow optimisation that avoids early upfront costs.
  • Finally the report points out the need to move fast as the more advanced the development the more certainty it will offer potential investors and tenants who will shortly be spoilt for choice.  

To download a copy of the report, click here.

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About the research – methodology
The research was carried out in November 2011 and is based on a snapshot analysis of commercial office development projects currently being planned for delivery in Central London through to 2020. 

It uses an estimation of development programme, total unit numbers, independent reports in the public domain, saleable area and sales values to assess the total number and area expected to be delivered per annum in this market segment for the next 8 years. It is not an exhaustive analysis of all schemes in the public domain but illustrates the clear profile of the future development pipeline.

For further information contact:

Andy Rowlands
Group PR Manager, EC Harris
T: +44 (0) 20 7833 6662
M: +44 (0) 7810 850 476

Simon Pugh
Account Director, Weber Shandwick
+ 44 (0)20 7067 0320 / +44 (0)7762 657 280

About EC Harris
EC Harris is a leading global built asset consultancy. As an ARCADIS company, we have approximately 19,000 professionals worldwide operating in over 70 countries, 300 offices and generating in excess of €2.3 billion in revenue. Working across a wide range of market sectors, we help our clients make the most from the money they spend on their built assets.  For more information visit

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Andy Rowlands
EC Harris
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t +44 (0)20 7833 6662
m +44 (0)7810 850476

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