Capital Sees Record Starts For Office Projects Even As Biggest 2024 Openings Sit Empty
Five of the 10 largest London office schemes set to complete in 2024 sit empty, but that hasn't stopped developers from pursuing a record number of new office developments in the capital.
Just over a third of the total square footage is let in the 10 largest schemes set to complete this year, down from nearly half let at the start of 2023 and up from about a quarter at the start of 2022, according to a Bisnow analysis of data provided by Deloitte.
The figures highlight how difficult it remains to secure large pre-lets for big schemes even as corporate occupiers solidify working patterns nearly four years after the start of the pandemic.
Eight of the 10 largest schemes completing this year are refurbishments or retrofits of older buildings, underlining that even the greenest options are not immune to the slow pace of leasing. Cushman & Wakefield predicted London office leasing would end at about 8.5M SF in 2023, significantly below the five-year average of about 11M SF.
Yet despite the tough climate, developers are pushing the button to start new schemes in record numbers. The 5.1M SF commenced in the six months to October was the most since Deloitte began compiling data in 2005, although the firm said not all of those schemes would hit scheduled completion dates.
“There’s a catch-up after Covid delayed a lot of schemes, but we also think there is not enough good-quality new supply to meet the demand that’s out there,” Deloitte Director of Real Assets Advisory Sophie Allen told Bisnow.
Here’s everything you need to know about the 10 biggest schemes scheduled to complete this year, from smallest to largest.
3 Sheldon Square
British Land and GIC are refurbishing 135K SF at 3 Sheldon Square at their Paddington Central office campus in west London, with the scheme scheduled to complete in the first quarter. Virgin Media O2 leased 83K SF in February this year, with 52K SF remaining to lease.
Tide
Tide is a new 146K SF scheme on London’s South Bank being developed by Barings and LBS Properties. Cain International provided a £109M development loan in September 2021. The scheme topped out in October last year, with completion scheduled for Q4, but it has yet to announce any tenants.
R8, King’s Cross
Building R8 at King’s Cross, the other new-build scheme on this list, will comprise 170K SF of offices when completed in Q3. It is owned by the King's Cross Central LP, which is backed by pension funds AustralianSuper and Hermes, as well as developer Argent. The area is home to major tenants like Google and Facebook, and in 2021 flex space operator The Office Group, which now operates as Fora, agreed to take the majority of the building on a management agreement.
Metropolis
Metropolis, next to Marylebone station on the Euston Road in north-west London, is a refurbishment and extension of the former Woolworths headquarters in London. Owned by Henderson Park and developed by General Projects, the scheme will total 175K SF, 50% more than the previous building. It includes a timber-frame extension that produces 80% less carbon than using concrete and steel, the developer said. The scheme has yet to announce any tenants.
The Acre
Private equity firm Northwood Investors paid £165M for 90 Long Acre in Covent Garden in 2013. In 2020, it scrapped plans to knock the building down and build something new in favour of a refurbishment that will create 179K SF of new space. It secured a £300M refinancing and development loan in June 2021 to undertake the retrofit, which is being managed by Platform, but has not yet announced any tenants. The cost of the refurbishment is estimated at £150M.
33 Old Broad Street
The owner of 33 Old Broad Street, Hong Kong investor SEA Holdings, has the comfort of having a tenant in place at the 200K SF City of London scheme. Lloyds Banking Group has a lease at the building that runs to 2039, and the investor is undertaking a rolling refurbishment.
1 Southwark Bridge Road
M&G paid £115M for the 220K SF former offices of The Financial Times on the South Bank in 2018, having already lined up a deal for advertising agency WPP to occupy the entirety of the building. The scheme is scheduled to complete in Q2, with WPP also occupying nearby buildings Rose Court and Sea Containers House.
Stonecutter Court
A joint venture between Canadian investor Ivanhoé Cambridge and German pension fund Allianz bought Stonecutter Court in the City for £112M in 2014. The JV is close to completing a £100M refurbishment and expansion of the building, adding 86K SF to the existing 150K SF. Law firm Travers Smith pre-let 158K SF in 2021, leaving 78K SF still to lease.
Peterborough Court
Peterborough Court is one of a slew of offices previously occupied by Goldman Sachs in and around Fleet Street in Midtown that needed to be refurbished after the investment bank moved to a new headquarters in 2019. It was bought by Regis Fleet Street, a vehicle owned by wealthy Qatari investors, which appointed Broadwater Capital to oversee a retrofit of the 292K SF scheme. That is scheduled to complete in Q4, with no tenants announced.
Woolgate
The largest scheme completing in 2024 is the refurbishment of the 350K SF Woolgate office scheme in the City of London. Taiwanese insurer Cathay Life bought the scheme for £320M in 2014 and appointed Stanhope to oversee a refurbishment in January last year. Set to complete in Q4, there are no tenants announced yet for the scheme.
CORRECTION, JAN. 16, 12 P.M. ET: A previous version of this story said that building R8 at King's Cross does not have a tenant. The story has been updated to reflect that The Office Group has taken the majority of the building on a management agreement.
