Hello, my name is Eoin O Murchu, and welcome to this special Insights edition of Futureproofed. Today, I'm welcoming back Sophie Allan to the podcast, who is a director in Deloitte's real estate advisory team, and specializes in development consultancy, funding business case and agency advice. Today's Insights podcast is in response to the latest findings from the June, 2024 Summer in London Office Crane Survey, which for the past 25 years has been a barometer of business and developer sentiment in London led by Deloitte.
Sophie, for those who may be unaware, can you provide an overview of the purpose of the Crane Survey?
Yes, of course. The London Office Crane Survey is something we've been doing since 2005, and it monitors office construction and development in the London market. We look at everything over 10,000 square feet, and we do it twice a year.
And this current survey period is for the six months up to the end of March this year.
And what are some of the key observations from the Summer 2024 edition of the survey?
We've seen the volume of new starts has dipped this survey period. So it's dipped by 18% since the last survey period. So we're now at 4.2 million square feet over 42 schemes.
But having said that it's dipped, it is still well above the 10 year average, which sits at 3.3 million square feet. What's interesting to see is that over the history that we've been recording, this is the third consecutive survey that we've seen new start volumes exceed 4 million square feet. Another key theme we've seen in this survey is that refurbishments continue to dominate.
This survey period saw 1.4 million square feet of new build, but 2.8 million square feet of refurbishment. However, I would say that this is a decrease in volume of both since the last survey, yet still materially higher than the levels that we were seeing pre-COVID. The data is showing a meaningful shift to refurbishment, and this is the eighth survey that refurbishments have outstripped new builds.
And prior to that, this only happened twice in the previous 10 surveys.
And why are we seeing more refurbishments?
Benefits to the environment, naturally reduced in body carbon.
Planning tends to be easier for refurbishment. Tighter delivery schedules, meaning it gets delivered quicker. And the hybrid working revolution continues with the implications that it has on refurbishment and quality space.
And has funding and availability of us played an issue in any of the observations within the survey?
Yes. So as part of our crane survey, we obviously monitor all the data, but we also run a developer survey, which really tests the sentiment. This was the first time when we posed the question, what is the biggest challenge to development at the moment?
That availability of funding came right up at the top. It did still sit alongside top challenges of planning and the economic environment. But I think that's a notable leap for it.
Interestingly, we did see other things fall. So confidence in the leasing market almost halved as voted as a top challenge. And I think that is one thing that's come through in this crane survey, that there is confidence in the market, which is largely being driven by the continued demand for premium space and also the strength of the performance in the West End and the city.
That's really interesting, Sophie. And what's been the reaction to date to this summer 2024 edition of the survey?
We actually had a guest speaker, Laura Fernie, from Places for London, who is their relatively new in post head of commercial offices. She really resonated with a number of the key messages from the London Crane Survey findings, in particular, the flight to quality. So for assets in real prime locations, for example, the ones that they have above all the cross rail stations, there's a real demand and lettings are happening very quickly.
I think on the flip side for assets in her portfolio, which are in need of refurbishment and not reaching sustainability standards, there's a real challenge of how to tackle them and with the expensive refurbishments and the standards that are required to be met. So it was really interesting to hear from Laura and I think all our audience found that as well.
Thanks, Sophie. That's brilliant. And where can we go to find out some more about Crane Survey?
Oh, please do go to the Deloitte website, forward slash crane survey.
Thank you, Sophie, for joining this special edition of Futureproofed Insights. If you've enjoyed this episode, please do take a moment to like, share and subscribe and keep an eye out for future episodes on topics such as digital transformation, delivery excellence and other exciting and interesting themes across the real assets and camper project space. As Sophie said, please do check out the Crane Survey website at deloitte.co.uk/cranesurvey.