During the recession rents fell so steeply that the returns on a new property failed to cover its costs, let alone provide a developer with any profit. Now, a growing imbalance between increasing tenant demand and the near total absence of new property is beginning to put upward pressure on rents.
The relief is long overdue. In the City and the West End rents peaked at more than pounds 60 per square foot and have since fallen to half as much.
In many cases they are still too low to make a project worthwhile but with developments taking up to two years to complete, a trickle of companies are starting to dust off plans shelved half a decade ago as the 1980s bubble was pricked.
CITY OF LONDON: The magnum opus of the former Arts Minister, Lord Palumbo, One Poultry, is the highest-profile development in the City for many years. Work has just begun on this corner site opposite the Bank of England.
The building of the pounds 45m office and retail scheme on the triangular Mappin & Webb site has taken far longer than anyone could have imagined when it was first suggested 25 years ago.
Sir James Stirling's design, which followed the unseccessfil Mies van der Rohe glass tower plan, appears to have been well timed. When it is completed in two years' time, property agents believe there will be a marked shortage of office space in the City. Its unique position should ensure a premium rent.
Another contentious development site is Paternoster Square, next to St Paul's Cathedral. Few will shed any tears at the demolition of its bleak post-war blocks, possibly by the end of the year.
Bought five years ago by a consortium including Mitsubishi Estates, Park Tower and Greycoat, the property company rescued last year in an elaborate refinancing, Paternoster Square has been dogged by planning difficulties.
It now seems likely that Postel, the BT and Post Office pension fund that failed in its own bid to rescue Greycoat last year, will come in as a fresh partner on the proposed pounds 350m scheme.
Another City project that could soon reappear is a proposed 900,000 sq ft office development on the site of the former Spitalfields fruit and vegetable market, jointly owned by two construction companies, Balfour Beatty and Costain, and LET, the property developer. Part of the proposal, a 300,000 sq ft retail and residential scheme, has already got the go-ahead.
WEST END: Shortages of space are becoming acute. A recent survey from the property agent Hillier Parker suggested that at current rates of take-up all the available space in the St James's area will be exhausted within a year.
Such statistics have encouraged developers to look again at potential speculative developments. Even the cautious Prudential is building 50,000 sq ft of offices in Berkeley Square.
Elliott Bernerd's Chelsfield, which recently floated on the stock market, is dusting off plans for a 115,000 sq ft office scheme at Wool House, a prime location close to the Mall. Nearby, National Westminster is understood to be teaming up with Canada Life to put numbers 1 and 2 St James's Square together to form a 100,000 sq ft scheme.
Arcona, the Swedish developer, is busy on Pall Mall with 50,000 sq ft of offices, and the Crown Estate has ambitious plans for much of its Regent Street portfolio.
DOCKLANDS: Perhaps the hardest-hit of all London's central areas, Docklands is undergoing something of a revival although even the London Docklands Development Corporation would admit there is a long way to go.
In the year to March the residential market took off, with vacant houses and flats falling from over 600 to about 60. A 1,800-house urban village is planned for the Royal Docks on the eastern edge of the zone. Also planned is a million sq ft exhibition centre. A shortlist of four developers has been drawn up.
The biggest construction work in the area at the moment is the belated addition of a Jubilee Line Underground link. With the giant Canary Wharf still little more than half full, new offices will probably have to wait for the next cycle.
OUTSIDE LONDON: In other cities, the same balance between supply and demand is encouraging developers to resurrect plans. In Birmingham, Brindleyplace, one of the most ambitious office projects since London's Broadgate Centre, is under way. Argent, another recently floated developer, bought the 17-acre site from the receivers to Godfrey Bradman's Rosehaugh for pounds 3m. Renegotiated planning permission pushed its value up to more than pounds 26m.
OUT-OF-TOWN: Outside the town centres, developers are up against a newly green Department of the Environment.
Peel Holdings' plans for a million sq ft shopping centre on the edge of Manchester were axed last week by the Court of Appeal on a legal technicality, despite having gained approval last year.
More fortunate was Blue Circle, which last month sold a former chalk quarry in Kent to Lend Lease, an Australian property company, which plans to build the UK's largest shopping centre.
Not surprisingly after the ravages of the past four years, the return to the development cycle is slow and cautious. Perhaps not this year, but certainly next, the Christmas skyline will twinkle with illuminated cranes again.
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