Construction has hit a speed bump, with numbers of new office construction starts in the capital down 35% year-on-year, according to Deloitte.
Issues with viability and occupier demands for principally best-in-class new space have hampered activity. New office construction starts and new builds have totalled 4.8 million square feet of space across 57 schemes in 2025, the Deloitte London Office Crane Survey shows.
This was down from 5 million square feet in 2024 and even further from the 8.7 million square feet delivered in 2023. It has also come in below the five-year average of 6.5 million square feet, the report said.
Of the schemes that are getting off the ground during the post-Covid era, refurbishments are leading the way accounting for 66% of all new start volume, as investors and developers look to swerve the planning and build costs associated with ground up construction. In total 3.1 million square feet of refurbishment projects started in 2025, as investors looked towards refurbishment over rebuilding. Yet, this was down from 3.8 million square feet in 2024.
Data, which was collected between 1 January and 31 December 2025, found that new-build schemes more than halved year-on-year, down from 3.6 million square feet in 2024 to 1.6 million square feet last year.
As a result the sector is facing a bottleneck and potential supply squeeze from 2027-2030, with fewer new schemes starting and completing as developers continue to avoid the higher risk associated with new construction.
Yet, in total the market received 7.1 million square feet of space, up 8% on 2024 and the third highest volume on record since the survey started 30 years ago. The years which beat it were 2003 and 2023.
Sentiment among developers is positive thanks to ongoing strong appetite in occupational markets for grade-A office stock, with 58% stating that they predict that their pipeline is set to increase in the next 12 months. This was followed by 34% who said they expect their office pipeline to stay stable during the same period.
This positivity was also reflected in the sentiment toward occupational markets, as 75% of developers said they felt better about leasing demand than this time last year. It comes as rents in the capital continue to climb, with prime rents hitting £187 per square foot in the West End. That has been coupled with an increasingly low vacancy rate, which sits at 1%, the survey noted, creating a combination that has bolstered sentiment despite the current macroeconomic conditions.
Caroline Waldock, partner, real estate sector lead for Deloitte, said: “London’s office market remains attractive, and the capital continues to attract global investment, talent and businesses. Occupier requirements and demand for best-in-class space is strong and is underpinning record prime rents.
“Larger tenants are facing scarcity, with competition for high-quality assets that are suited to companies’ changing sustainability and technology requirements. However, while developers are confident in their pipeline, there are real delivery constraints, which brings with it a potential future supply gap.”
Philip Parnell, partner and head of real estate valuation at Deloitte, added: “Developers are once again facing rising construction costs and financing uncertainty alongside planning complexities associated with delivering projects in the capital. The continued shift to refurbishments goes beyond sustainability requirements and represents challenges around scheme viability, delivery risk and addressing occupiers’ evolving needs around quality and flexibility.”