By Art Patnaude
LONDON--Office construction in London has slowed since Britain voted to leave theEuropean Union, a signal that uncertainty over the terms of the breakup is affecting plans in Europe's biggest real-estate market.
Work started on 40 new office buildings in London between April and September, down from the record-setting 51 started in the previous six months, according to accountancy firm Deloitte LLP.
"The result of the EU referendum has weighed heavily on the market, both for tenants and developers alike," the Deloitte report said.
The value of London offices has fallen since the Brexit vote in June. Part of the concern is that banks and other financial-services firms might relocate some operations to other cities in the EU. Corporate renting activity is already slowing, Deloitte said.
Another concern has been a building boom. The amount of office space currently under construction remains at an eight-year high, with 14.8 million square feet of space being developed, according to Deloitte. The average over the last 10 years is 9.7 million square feet.
The greatest number of new developments started in the six-month period analyzed were in London's main financial district, Deloitte said.
The rising amount of space combined with Brexit uncertainty have caused developers to pare back plans.
More than 1 million square feet of space that had been scheduled to be finished by the end of September remained under construction, said Deloitte, which reduced its estimate for how much office space will be finished this year.
"The shifts in planned completion dates recorded in this survey are greater than normal, and at least part of the explanation appearsto be heightened uncertainty over the scale of future tenant demand in light of the EU referendum," the Deloitte Crane Survey said.
The amount of vacant office space in central London rose to 4.8% at the end of the third quarter from 3.9% at the start of the year, Deloitte said.
If vacancy rates continue to rise, landlords may start lowering rents, the report said.
Write to Art Patnaude at email@example.com
(END) Dow Jones Newswires
November 15, 2016 03:45 ET (08:45 GMT)
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