Changes to the planning system to enable the upgrade of central London鈥檚 outdated office space could deliver an 拢84bn economic boost and unlock 拢262bn in investment value, according to new analysis by the London Property Alliance and Knight Frank.
A new report, Space for Change: Office space dynamics in central London, says that between 2018 and 2023 some 14 million sq ft of office space was lost in London鈥檚 central activities zone (CAZ 鈥� roughly equivalent to London Underground zone 1), while there will be an estimated 11 million sq ft shortfall of space in the capital over the next five years.聽
The analysis finds that 56% of office space, spanning 147 million sq ft, is classed as 鈥榮econdary鈥�, offering poor quality workspace that is set to fall below mandatory sustainability standards by 2030.
According to the report, the supply-demand dynamics make the upgrade or redevelopment of secondary space 鈥渦rgent and increasingly compelling鈥�.
The availability of prime (0.8%) and Grade A (1.7%) office space is close to historic lows, and in total there are just 12 of the very large single office floors (above 40,000 sq ft) available that large corporates favour to consolidate staff and operations.
Companies are currently actively seeking 10 million sq ft of office space, 7% above the long-term average, with demand driven by the financial and professional services sectors.
There is 15.4 million sq ft of new office space set to be delivered between 2025 and 2029 but a significant proportion is already pre-let or not located in the core City and West End markets where demand is more acute. Not only does this not adequately replace the space lost between 2018 and 2023, it does not provide the capacity to meet current or future demand.
The London Property Alliance represents leading developers and investors in central London. It argues that intervention is needed to prioritise major office development in commercial centres and streamline planning. It wants office buildings to be treated as 鈥榚conomic infrastructure鈥� and planning and regulatory processes to be streamlined.
According to the developers, the biggest barrier is development viability, exacerbated by a complex and challenging planning environment. Planning authorities should reduce and streamline the costs, obligations and regulatory requirements placed on schemes, they say.
Ross Sayers, chair of City Property Association and head of development management at Landsec, said: 鈥淒evelopment viability remains one of the biggest barriers to upgrading or redeveloping secondary buildings. Across the City of London and the wider central London market rising construction, labour and finance costs, combined with an expanding range of planning obligations, are creating financial pressures that too often tip the balance against intervention.
鈥淭his is a pivotal moment for the public and private sectors to work together on pragmatic solutions that enable central London to meet demand and maintain its position as a world-leading business centre.鈥�
James Raynor, chair of Westminster Property Association and chief executive of Grosvenor Property, said: 鈥淭he significant volume of ageing office stock is a threat to future supply unless the barriers to upgrading it to the high quality, sustainable, workspace businesses need are addressed. Working together with flexible, forward-looking planning polices the property sector could unlock economic growth and the benefits that come with it.
鈥淚f聽聽 London is to remain a magnet for global enterprise, we must use every lever available to support that ambition, while continuing to target net zero and contribute to local communities.鈥�
Shabab Qadar, head of central London research at estate agent Knight Frank and the report鈥檚 author, said: 鈥淭here is a systemic failure in the central London office market where demand for the best space is intensifying, but supply can鈥檛 keep pace as office space is repurposed for other uses and planning and regulatory hurdles threaten development viability.
鈥淭he case for upgrading or redeveloping the swathes of outdated, older office buildings has never been more compelling for developers, investors and policymakers alike.鈥�
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