Results from DTZÂ's Central London DeveloperÂ's survey reveal a 47% fall in schemes scheduled for speculative development compared with six months ago: from 0.30 mln m2 to 0.16 mln m2. This increased caution exhibited by developers is already being reflected in speculative construction starts across Central London: in the last 6 months 0.09 million sq m (1.0 million sq ft) of schemes have started, compared to 0.14 million sq m (1.5 million sq ft) in the previous six month period.
The combination of schemes both under construction and scheduled indicates that deliveries of speculative space will rise in 2003 before falling in 2004.
This report provides a summary of the results of the latest half-yearly survey of developersÂ' intentions undertaken by DTZ Research in September 2002. The survey examined office schemes with existing planning consents, but not yet under construction, above 2,320 sq m (25,000 sq ft). There were 134 of these across Central London, totalling 2.5 million sq m (27.4 million sq ft).
Since DTZ ResearchÂ's last survey in March 2002 construction has started on just over 0.14 million sq m (1.5 million sq ft) of schemes over 2,320 sq m (25,000 sq ft), three quarters of which (0.1 million sq m/1.1 million sq ft) was started on a prelet or owner occupier basis. The remaining 0.04 million sq m (0.45 million sq ft) was initiated speculatively, a decline of 92,930 sq m (1 million sq ft) on the previous six month period.
In March 2002 speculative schemes totalling 0.38 million sq m (4.1 million sq ft) were identified by developers as being committed - i.e. having firm commencement dates for construction. In October this total stood at 0.16 million sq m (1.7 million sq ft), approximately a 47% decrease, in contrast with a 2% decrease over the previous six month period. This represented the third successive survey in which the volume of confirmed completion dates on schemes with planning consent has fallen. The attached graph plots the evolution of the scheduling of these prospective speculative developments through the past 4 surveys conducted bi-annually.
The steady increase in the volume of development intentions revealed by DTZ surveys between 1999 and 2001 has come firmly to a halt. While the substantial increase in development intentions identified in previous surveys fed through in terms of speculative construction starts. The past two surveys indicate that this trend is going into reverse: 0.09 million sq m (1.0 million sq ft) was started in the last 6 months, compared to 0.14 million sq m (1.5 million sq ft) in the previous period.
Incorporating the results of the latest survey into the speculative development pipeline indicates that new supply has fallen off markedly this year, likely to increase in 2003 and fall once again in 2004. The volume of deliveries in 2003 and 2004 can be forecast with a substantial degree of precision because of the high proportion of buildings already under construction and knowledge of the construction lead times involved. The eventual 2005 total may prove to be higher, but the results of this survey, combined with the trend over time toward fewer schemes coming through the pipeline, make it likely that it will be less than in the previous year.
Availability has continued to grow substantially since the last developersÂ' survey and, while much of this is accounted for by good second hand space, newly built availability is also rising. In March 2002 there was 1.39 million sq m (15.0 million sq ft) of office space under construction in Central London, of which 0.48 million sq m (5.3 million sq ft) was available. By the end of September, this had risen to 1.56 million sq m (16.8 million sq ft), of which 0.65 million sq m (7.0 million sq ft) was speculative.
(source: DTZ)
