Charles Wright: Has working from home changed London’s planning needs for good?

Charles Wright: Has working from home changed London’s planning needs for good?

Sadiq Khan has been talking climate action with his New York counterpart Eric Adams. The pair recently proclaimed their joint commitment to “climate budgeting”, and Mayor Adams is following Mayor Khan’s lead by setting out annual carbon reduction plans for his city alongside conventional financial targets.

But the New York Mayor may have some lessons for London too. Facing a “new normal” of hybrid working and a housing crisis – sound familiar? – Adams is now consulting on plans to make it easier to convert offices into homes, targeting parts of midtown Manhattan in particular. “The world has changed,” Adams told the New York Times. “We have to be willing to change with it.”

So far, London is taking a different tack. Sometimes it feels like a “one more heave” strategy to get workers back into the office, with bosses apparently now deploying more stick than carrot, but it increasingly seems more like trying to hold back what looks like a permanent shift in how we work.

Office occupancy in London stood at just 32.9 per cent in the week ending 8 September. That is no higher than at the start of the summer and well down on the pre-pandemic average of around 60 per cent. Monday to Friday Tube ridership remains stubbornly at around 80 per cent of pre-Covid totals, and suburban rail has lost millions of weekday passengers.

“We are seeing people commute on a Tuesday, Wednesday and Thursday, and that pattern is absolutely set now. I can’t see that changing again,” was the stark conclusion of Govia Thameslink chief Angie Doll, speaking to the Evening Standard. And that means, in property agent-speak, “right-sizing”. The highest profile examples so far are HSBC quitting its landmark Canary Wharf tower for offices half the size in the City, and tech giant Meta pulling out of central London offices at 1 Triton Square (pictured) it leased in 2021 but never actually occupied.

What does this mean for the capital’s “central activities zone”, where office use is prioritised in planning policy? The number of office jobs is still projected to keep growing over the next 20 years or so, but how many desks will be required? Will economic realities dent that projected growth in any event? And what should be done with those many existing buildings that don’t meet occupiers’ demanding standards or meet energy efficiency requirements?

So far, the City of London Corporation, the planning authority for the Square Mile, is betting on continuing demand for premium space – the so-called “flight to quality”. The 63-storey 55 Bishopsgate block, set to be the third tallest tower in the City, is just the latest in a crop of gleaming skyscraper schemes approved by the Guildhall, including what will be the very tallest, the 74-storey 1 Undershaft, and the 57-storey 100 Leadenhall Street.

Last week’s unveiling of the spectacular viewing platform at the summit of the now almost entirely let 58-floor 22 Bishopsgate behemoth was heralded in the Standard as a sign of confidence in the City: “When it comes to top quality office space in London…the sky’s the limit.”

It’s very much a mixed picture, though. Continuing high inflation and interest rates are putting the brakes on development, along with “new difficulties” with securing planning permission, according to a gloomy update from major architectural practice Make. Its £700 million South Bank office scheme is currently held up awaiting a ruling by communities secretary Michael Gove.

Office values in the City are down almost a fifth compared to last year, and with central London vacancy rates at their highest in some 30 years, the capital is suffering a “rental recession”, according to investment bankers Jefferies. Their analysis was cited in a CNN report describing “vast tranches of the capital’s once-bustling business districts” as “gathering dust because of the persistence of remote work”.

The comment highlights a clear division in the office market: occupiers are queuing up for the highest-quality, most sustainable space, but at the same time there are significant challenges for “secondhand” stock, not always easy to upgrade, which constitutes most of what is available. If the City is in a race to get new offices built, it faces a “stranded asset” dilemma too.

Will tourists and students come to the rescue? The Guildhall’s “Destination City” programme aims to boost the Square Mile’s “24/7” leisure and culture offer, supporting a growing number of office to hotel conversion plans, most recently at the 1970s New London House by Fenchurch Street station. Student blocks replacing unviable offices are proliferating in the same area.

A necessary shift, but is it sufficient? A future of high-end offices, hotels and student rooms may be attractive to some, but when London’s need for housing is reaching crisis point and the City needs people, it is hard to justify planning policies which effectively prevent office to housing conversion.

As Mayor Adams says, the world is changing. Time, perhaps, for Mayor Khan and the Guildhall, to, like be like New York and change with it.

X/Twitter: Charles Wright and On London. If you value On London and its writers, become a supporter or a paid subscriber to publisher and editor Dave Hill’s Substack. Thanks.

Categories: Analysis

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