Building London’s hotspots: the top ten

Cen­tral London’s com­mer­cial prop­er­ty mar­ket is being shaped by two real­i­ties. The capital’s econ­o­my is rebound­ing, but recent years have seen the vol­ume of new devel­op­ment fail to keep pace with demand for office space.

While on the face of it the Lon­don sky­line is lit­tered with cranes, more than 40 per cent of office space cur­rent­ly being built is already let to ten­ants ahead of com­ple­tion. If we look at build­ings com­plet­ing this year the fig­ure is close to 50 per cent let.

Present­ly there is 4.5 mil­lion square feet of office space under con­struc­tion on a spec­u­la­tive basis, with­out a ten­ant yet secured. How­ev­er, the last year has seen firms in cen­tral Lon­don take 5.5 mil­lion sq ft of new-build office space, part­ly by raid­ing the pipeline and acquir­ing space under con­struc­tion, so clear­ly there is a mis­match between sup­ply and demand.

The sit­u­a­tion is of par­tic­u­lar con­cern giv­en that demand for offices is grow­ing. A new wave of tech­nol­o­gy and cre­ative firms has been expand­ing in the cap­i­tal, form­ing the largest source of demand for the last three years. Tech giants Google and Ama­zon have both acquired new Lon­don head­quar­ters and then decid­ed they need­ed to acquire addi­tion­al space on top.

Also, after years in the dol­drums, the finan­cial sec­tor is again tak­ing office space, with major deals in the City by fund man­agers Schroders and M&G, and Dutch bank ING. With finan­cial demand re-emerg­ing, oth­er City indus­tries draw­ing work from the finance indus­try, such as law and account­ing, have been more active in the office mar­ket.

A new wave of tech­nol­o­gy and cre­ative firms has been expand­ing in the cap­i­tal, form­ing the largest source of demand for the last three years

Con­se­quent­ly, Lon­don is faced by a new wave of demand from the tech­nol­o­gy sec­tor, just as its tra­di­tion­al finan­cial and busi­ness ser­vices indus­tries are start­ing to re-enter the office mar­ket. Sup­ply is con­se­quent­ly under pres­sure. Vacant office space cur­rent­ly equates to 7 per cent of built stock, down from 11 per cent five years ago.

Giv­en these sup­ply and demand pres­sures, prop­er­ty devel­op­ers are ready­ing the next wave of projects.

For­mer indus­tri­al dis­tricts can pro­vide devel­op­ers with a blank can­vas on which to build in scale. Anoth­er option is rede­vel­op­ing old­er office build­ings which are approach­ing tech­ni­cal obso­les­cence. There was a build­ing spike in the late-1980s and ear­ly-1990s, and many of the build­ings from this era are ripe for rede­vel­op­ment.

Demand up to now has been strongest in trendy dis­tricts, such as Shored­itch and Fitzrovia, which are pop­u­lar with tech­nol­o­gy and media firms. How­ev­er, increas­ing finan­cial demand will encour­age devel­op­ers to look again at the tra­di­tion­al core dis­tricts, such as the area around the Bank of Eng­land and May­fair, which is pop­u­lar with hedge funds and pri­vate equi­ty firms.

WHERE IT’S HOT TO BUILD IN THE CAPITAL

For­tu­nate­ly for London’s rebound­ing econ­o­my, the cap­i­tal has no short­age of what the prop­er­ty indus­try calls “oven-ready” sites. Here’s a selec­tion of future hotspots:

WATERLOO

Recent­ly approved by the Sec­re­tary of State, the 1950s Shell Cen­tre is set to be rede­vel­oped as One and Two South­bank Place, with 550,000 sq ft of office space, 764 homes and 80,000 sq ft of retail space. A rede­vel­op­ment of the near­by Eliz­a­beth House site will deliv­er 740,000 sq ft of office space and 142 homes adja­cent to Water­loo main­line rail­way sta­tion.

NINE ELMS AND BATTERSEA

The Bat­tersea Pow­er Sta­tion site is to see the devel­op­ment of 3,500 new homes, 1.6m sq ft of offices, plus retail and leisure, on the 42-acre site. Work on the exten­sion of the North­ern Line to Nine Elms and Bat­tersea Pow­er Sta­tion is expect­ed to begin next year. Also the Unit­ed States and Nether­lands embassies are plan­ning to relo­cate to new build­ings in Nine Elms.

VICTORIA

Demo­li­tion and rede­vel­op­ment of old­er stock on and around Vic­to­ria Street is result­ing in a trans­for­ma­tion of this area. Next year will see the com­ple­tion of the Zig Zag Build­ing on Vic­to­ria Street, deliv­er­ing 188,000 sq ft of offices and 37,000 sq ft of retail. Near the rail­way sta­tion, the first phase of the Nova scheme, com­pris­ing 480,000 sq ft of offices, 80,000 sq ft of retail and 170 lux­u­ry apart­ments, is under con­struc­tion, with anoth­er 125,000 sq ft of offices and retail to fol­low.

NORTHERN CITY

The White Col­lar Fac­to­ry on City Road is to be an urban cam­pus in London’s Tech City, con­sist­ing of five build­ings set around a court­yard. The project com­pris­es 215,000 sq ft of offices and 11,000 sq ft of retail. The urban cam­pus con­cept is to be explored fur­ther with the pro­posed regen­er­a­tion of the his­toric Smith­field Mar­ket. The mas­ter plan for the Smith­field Quar­ter is for 340,000 sq ft of offices in three build­ings above retail and leisure. Vacant since a fire in 1964, The Goodsyard site off Shored­itch High Street could accom­mo­date up to 2,000 homes, between 300–600,000 sq ft of offices, as well as shops and leisure facil­i­ties, and 1.8 hectares of pub­lic areas.

CITY CORE

100 Bish­ops­gate is a scheme com­pris­ing a five-storey podi­um suit­ed to trad­ing floors and a 40-storey sig­na­ture tow­er. It is set among the City’s sky­scraper clus­ter, between 30 St Mary Axe (aka The Gherkin) and the Sales­force Tow­er, join­ing oth­er icon­ic tow­ers such as 20 Fenchurch Street and 122 Lead­en­hall Street. In the next few years, sev­er­al of the 1980s phase-one build­ings in the Broadgate estate will see lease expiries, free­ing them up for rede­vel­op­ment. This will pro­vide an excit­ing new phase for the world-famous City estate.

MIDTOWN

For­mer­ly known as the Inter­na­tion­al Press Cen­tre, 1 New Street Square will con­sist of 243,000 sq ft of offices over 16 floors and 5,000 sq ft of retail. Midtown’s future mega-project will be the devel­op­ment of the new Gold­man Sachs head­quar­ters. This will be a one mil­lion sq ft build­ing at Plumtree Court and Fleet Build­ings, and is expect­ed to com­plete around 2017.

MAYFAIR AND ST JAMES’S

Indi­vid­ual sites tend to be rel­a­tive­ly small in this dis­trict, but as build­ings here com­mand the high­est rents in the West­ern world, the devel­op­ments are very exclu­sive. Up-and-com­ing schemes include 1 New Burling­ton Place with 80,000 sq ft of offices, 8 St James’s Square at 65,500 sq ft, and 1 and 2 St James’s Mar­ket at 214,000 sq ft. Just to the north of May­fair is the new Mar­ble Arch Tow­er scheme which will con­sist of 57 lux­u­ry homes and 84,000 sq ft of offices.

BLACKFRIARS ROAD

Near the Tate Mod­ern gallery, a pro­posed new scheme at Ludgate and Samp­son hous­es, to be called The Bank­side Quar­ter, will include 1.5 mil­lion sq ft of offices, 489 homes and retail space. The near­by 20 Black­fri­ars Road site has a pro­posed 42-storey res­i­den­tial sky­scraper scheme and a neigh­bour­ing 23-floor office build­ing.

PADDINGTON

There are plans to fur­ther expand the Padding­ton Cen­tral estate with 4 and 5 King­dom Street, which will total 350,000 sq ft of office space. The 55 North Wharf Road office scheme will add anoth­er 260,000 sq ft of office to stock. The final phase of the Mer­chant Square scheme will deliv­er a fur­ther 167,000 sq ft of office space, while as a result of Cross­rail, the Tri­an­gle site on Bishop’s Bridge Road could see 200,000 sq ft of offices devel­oped.

WOOD WHARF

To the east of the estab­lished Canary Wharf estate, Wood Wharf will con­sist of 2.6 mil­lion sq ft of office space, 340,000 sq ft of shops and more than 3,000 homes set around a water park.