Mid-pandemic predictions of the death of the office may have been proved wrong, but central London is nevertheless seeing major change post-Covid – with significant implications for the Central Activities Zone (CAZ) powerhouse of the city economy, the London Assembly economy committee has heard.
The key change? Hybrid working, now “here to stay”, according to Jonathan Seager of commercial lobby group BusinessLDN. “The days of being in the office five days a week are long gone. They will never return,” said Kate Hart, from the EC Business Improvement District in the Square Mile. “And the government can’t do anything about that,” added City Hall business policy chief Ben Johnson.
Working from home on Mondays and particularly Fridays has contributed to a slower post-pandemic footfall recovery in the city centre than in the rest of the capital, Assembly members (AMs) heard. Office workers have highlighted “quality of life” improvements from the new way of working, but its longer-term impact remains uncertain.
The jury is still out on whether remote working might further harm productivity growth – which was already low in London even before Covid with rises between 2007 and 2019 of just 0.2 per cent a year – and undermine the “agglomeration” impact of the capital’s clusters of financial services, technology, life sciences and more.
There have been individual impacts too, notably on staff development and the “informal apprenticeship” benefits for younger workers of being together with colleagues as well as on mental health and social life. And the wider health of the city is also at stake, AMs were told.
“We want a Central Activities Zone that is vibrant seven days a week, not just on Tuesday Wednesday and Thursday,” said Hart. “We do need ways to bring more workers back, not only from a productivity point of view but to support that vibrancy, to make London that attractive global city.”
That means continued support for the City Corporation’s Destination City programme, which promotes the Square Mile as a place for leisure, culture and tourism alongside its traditional office role, and for City Hall’s Let’s Do London domestic and international visitor drives. “We are talking about reinventing Friday too,” said Hart, suggesting new flexible fares arrangements should be introduced to encourage workers as well as visitors back to the city.
Even so, recovery has been continuing. Seager said central London has remained a place where, said Seager, “businesses of all sizes…want to have their headquarters”. But he added that hybrid working and a new focus on collaboration and interaction in the office – “no longer just sitting at your desk” – meant the office is changing too.
This has been shown by the so-called “flight to quality”, said Rosie Day (pictured), director of the London Property Alliance, which represents property businesses across the central area. She said businesses are now seeking out the highest-quality office space – well-connected, “amenity-rich” and sustainable and with the “best of London” on their doorstep.
Day rents for this “Grade A” space are rising year on year, she said, by more than 10 per cent in the West End and seven per cent in the Square Mile. By contrast, lower grade offices that don’t match up to expectations are increasingly at risk of becoming unlettable “stranded assets”.
Office vacancy rates are high, the committee heard, approaching 10 per cent in the City and perhaps twice that rate in Canary Wharf, though refurbishment and “repurposing” are underway where viable, including for new growth sectors such as life sciences – “2.1 million square feet of life science space being developed as we speak,” said Johnson – and some housing.
But the risk of “uncontrolled” conversion of office space to housing remained, said Day, particularly if Whitehall-mandated permitted development rights, allowing changes of use without the need for formal planning permission, are extended by the government.
“There is a danger that poor quality undesirable offices could be turned into poor quality homes,” she warned. “If we just switch all this office stock into poorly designed, inappropriate housing we could be creating the slums of the future, which is absolutely not what the CAZ needs.”
That means taking a hard look at City Hall’s London Plan, due for review after next year’s mayoral elections, said Seager. “There is quite a lot hanging on that. Planning policies and the plan’s evidence base are all pre-Covid, and we shouldn’t kid ourselves that nothing has changed, particularly in the CAZ.
“We need to protect the commercial core of London, but we also need to acknowledge the market has moved on. You’ve got a threat of blight, and that applies to the CAZ as it does to other parts of London. We need planning to be an enabler of flexible adaptation of this space. There’s some hard work to be done on planning policy, on the CAZ designation and what it means.”
The economy committee session can be viewed in full here. X/Twitter: Charles Wright and OnLondon. Support OnLondon.co.uk and its writers for just £5 a month of £50 a year and get things for your money too. Details HERE.