London's office space market is about to get a whole lot bigger with 51 new developments starting construction in the six-month period from October 2015 to March this year. It's the highest level of construction in 20 years, according to Deloitte Real Estate's London Office Crane survey. The number far surpasses the 2007 record of 37 office construction projects and comprises 14.2 msf, the greatest amount of space under construction since 1Q08. More-stringent financing since the recession has limited new development, pushing down the vacancy rate in London's main financial district from 5.7 percent in 1Q15 to 3.4 percent in 1Q16, according to JLL. Although London office assets are a top buy for foreign investors, a slowdown across Europe - plus concerns about the “Brexit” vote - sent London deal volumes down 47 percent YOY in 1Q16, according to Real Capital Analytics.
Markets to Watch
“German investors were the most active cross-border investors, acquiring assets from Australia to Canada. Their 30-percent increase in activity elevated them above both Chinese and North American investors in 1Q16.” — JJL