Why has London approved more offices amidst a housing crisis?

Meghana Sadasya

August 2, 2022

London is known for its extravagant high-rise buildings integrated with historic landmarks, making it one of the most architecturally diverse cities. It is home to the 7th tallest building in Europe, The Shard and one of the ugliest buildings, 20 Fenchurch Street, commonly known as the Walkie- Talkie. It comes as no surprise that the City of London has strong intentions to maintain its reputation in architecture by approving new office developments.

The Square Mile have been approving modern construction due to many offices failing to meet the net zero carbon target. This is due to them being built in the 2000s and therefore there is some difficulty in refurbishing them to fit the standards. As a result, the easier solution is to demolish brownfield sites and re-construct them. This is the case with the new development of 115-123 Houndsditch.

It can be agreed that this would create more noise and disruption for the public. However, developers argue that they plan on making the office sustainable and a social space for the community. This development will be the 7th sky rise building that has been confirmed in the city.

A further reason for contemporary construction is that it rejuvenates the local area. The Shard is in an incredibly small site and based in a considerably impoverished location which did not seem like the ideal place for 1,000 feet building. After the construction, surrounding new built apartments were valued at £19.9m and Southwark is now considered a vital enterprise zone. It has also led the council to increase the number of their council homes and improve living standards.

Although, there is still a difference in wealth, there has been significant improvement. The Square Mile hopes for a similar result with Houndsditch which is in the East End of London and is not seen as wealthy. Re-developments in poorer boroughs is an efficient way of improving the local area and stimulating employment and business growth.

But in spite of the City of London’s seemingly pure intentions in approving new offices, there is a much graver issue to solve: the ongoing housing crisis. So far there has been a 70 per cent increase in approval of new buildings. The same cannot be said about affordable housing which rose about 40 per cent in the same time frame.

The obvious solution is to convert brownfield sites into flats, but it seems as though it is a difficult and enduring process which is often avoided. This leaves 20.2m square feet of office space unused indefinitely. Another plausible solution to the housing crisis is to build on green belt areas, but The Square Mile wants to preserve them along with two thirds of the public.

An evident cause for the increase in unoccupied buildings is to do with post-pandemic working. Due to COVID, work from home has skyrocketed and has led many businesses to appreciate the flexibility and ease of online working. This predominantly led to businesses moving out of their offices, essentially reducing workspace demand. Almost half of those employed in London moved to remote working and since restrictions have been lifted around 14 per cent continue to work from home and 24 per cent undertake hybrid working.

It is expected that businesses based in London no longer require huge office spaces and could downsize into a more cost-effective building. Constructing more offices allows established businesses to move from their existing location to a more modern property that fits in line with building regulations. Although the demand for offices remains relatively the same, the supply has been increasing which should ultimately lead to a decrease in price. But London is known for its extortionate rents and is unlikely to follow this economic theory.

The surplus of offices can also be owed to businesses moving out of London. A prime example is BBC who are now based in Manchester and have announced their plan to expand the Media City in the North. This is a positive goal pursued by the broadcaster and distributes capital more evenly. Around a quarter of the current businesses based in London are considering to also move out of the metropolis to less expensive areas. Not only do they want to reduce their costs, but it may also be more convenient for those living outside of London to travel into work. The relocation of major business to outside of London is seen as a beneficial decision towards the previous Prime Minister’s goal regarding ‘levelling up’.

There is clear reasoning for the approval of more office spaces by The Square Mile, but there is a requirement for housing. The lack of homes within London has been a cause of concern for decades and the problem has only been growing. Re-developing existing office buildings into homes would be cost effective and an appropriate action by the City of London. Office spaces are necessary for businesses based within the city but serving the public is a priority.


Written by Meghana Sadasya

Meghana studies Industrial Economics at the University of Nottingham and is a current Intern at the IEA.

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