Looking at forecast supply over the next four years, there are 27m sq ft of extensive refurbishments and new developments scheduled for completion across central London.

It is worth noting that figures for both 2023 and 2024 may both change with developer's enthusiasm for delivery tempered by both planning and construction delays.

Over the past five years, we have seen sustained levels of strong occupier demand which has resulted in high levels of pre-lets. Pre-lets have accounted for a quarter of leasing activity over the past three years, and during 2019 they accounted for 26% of the overall space that was acquired. Any prospect of the development pipeline relieving central London’s constrained supply diminishes when you factor in almost a quarter (6.1m sq ft) of the space scheduled for delivery over the next four years has already been pre-let.

An additional 5% of the remaining speculative available space is under offer with larger occupiers increasingly forced to launch their searches up to five years in advance of delivery to secure their preferred space. Due to the prevalence of pre-lets, around 50% of the 7m sq ft expected for completion during 2020 has already been pre-let.

Continued strong demand against the backdrop of limited supply is particularly challenging for larger occupiers in the West End, where larger floorplates are even rarer.

Currently, there are only around 25 Grade A floors available in the West End which could satisfy a single floor requirement sized 15,000 sq ft and over. Less than five of these floors are located in Core West End sub-markets (St James’s, Mayfair, Soho, North of Oxford Street & Covent Garden), where the Grade A vacancy rate currently stands at 2.3%.

Looking forward, supply is set to remain constrained across the Core West End sub-markets, with the entire amount of speculative space scheduled for delivery over the next five years amounting to just 4.2m sq ft in total. This is the equivalent of 14 months’ worth of Grade A take-up at the rate we have experienced over the last five years. As a result, we expect more West End occupiers seeking to expand or relocate, being forced to consider fringe and City alternatives.

The City market accounts for 70% of development activity over the next five years with peak levels of completions expected for this year and into 2023. High levels of development activity this year are partly due to the scheduled completion of 22 Bishopsgate, EC2 (1.3m sq ft). 2023 activity is boosted by 40 Leadenhall, EC3 (878,449 sq ft) and 1–5 Paris Gardens, SE1 (607,000 sq ft).

Almost 30% of speculative space scheduled for the next five years is located in the City Core. This is in comparison to the entire speculative pipeline across all West End sub-markets which accounts for 35%.

However, despite the high levels of development activity, we are set to see in the City over 2022 and 2023, when the entire speculative pipeline for the City for the next five years is also compared to the average rate of demand we have seen over the past five years, it only equates to just over two years’ worth of Grade A take-up.

Development activity is also set to peak across the SE1 sub-market over 2023 with 1.9m sq ft set to be delivered. Notable schemes which are set to complete in addition to 1–5 Paris Gardens include 25 Lavington Street (370,000 sq ft) and The Stamford, 18 Blackfriars Road SE1 (269,385 sq ft). Whilst only 7% of the development pipeline for SE1 has currently been pre-let, we expect low supply in the West End will stimulate further pre-lets across this sub-market.

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