London's Office Space Policies
Greater London has about 300 million square foot of office space, mostly concentrated within five main business districts:
- The City, with its finance, insurance and legal firms
- Westminster, where the major occupants are real estate and private banking firms, corporate headquarters and government organisations
- Camden & Islington, which has an abundance of creative, design, art, architecture and fashion firms, with a good mix of financial firms as well
- Canary Wharf, a major centre for banking, media and legal companies
- Lambeth & Southwark, mostly occupied by accountancy and consultant firms
An additional 2.17 million square foot of office space is under construction. This is besides a good proportion of the existing stock undergoing redevelopment.
The Mayfair and St. James's area has the highest office space rentals, with rent per square foot per annum averaging about £96.00. The other high rental areas, with average rent per square foot per annum above £70.00 are the City, Victoria, Knightsbridge and Belgravia.
At the other end of the price range, Clerkenwell & City Fringes have the lowest average rentals, with a square foot of office space costing slightly under £50.00 per annum. Other lower rental areas, where average rent per square foot per annum ranges between £50.00 and £60.00 are Waterloo and Euston. The rentals in areas such as King's Cross, Euston, Soho, Kensington, Chelsea, North of Oxford Street, Bloomsbury and Covent Garden are in the mid-range, with the average rent per square foot per annum anywhere between £60.00 and £70.00.Outlook
Office space is at a premium in a thriving business city such as London. Although the recent global economic recession has led to reduced demand for high-end space, especially in the financial sector, such slowdown has corresponded with increased intake by sunrise sectors such as tech industry.
Regardless of the recession that led to widespread job losses, especially in the financial sector, the outlook for the economy is an increased in 96,000 jobs in the City alone, with about 70 percent of such new jobs requiring office space. This would translate to an additional requirement of about 16 million square foot of office space by 2026.
The average vacancy rate has hovered around 10 percent throughout the last decade, although new capacity tends to fill up quickly.The London Plan
The London Plan which aims for the planned and systematic development of the metropolitan area as the "best city in the world" outlines the policies related to office space and mixed-use development.
The plan puts in place processes to estimate the capacity of office space required and take steps to realise such potential capacity. A major thrust of the plan is on identifying and developing vacant brown field sites at key locations and renovation of existing stock of office space.
The plan strives not just to ensure availability of office space, but also for flexibility and better quality space. It seeks provision of office space of many types, ranging from tall buildings to small floor plates, at different cost levels, to meet the requirements of all sectors and all types of businesses, including small and medium sized enterprises.
The planning strategy splits fulfilment of office space targets into phases to factor in contingencies that result from an uncertain business environment. Such a phased approach would avoid both over-provision and under-provision in the short-term. The plan also adopts a flexible approach of factoring in alternative uses for vacant offices and sites on temporary basis, to avoid short-term vacancyBorough Level Activities
The plan entrusts boroughs with the task of developing strategies to manage the office space requirements keeping in consideration the ongoing structural changes. Towards this end, the boroughs would:
- Coordinate with stakeholders such as the London Development Agency, investors, developers, land owners and potential occupiers to make available capacity
- Facilitate the availability of development sites, through compulsory purchase process if necessary
- Avoid planning delays and ensure seamless processing on applications
- Ensure accessibility to development sites
- Ensure that office complexes and the overall environment of the office locations remains physically attractive
- Ensure the availability of ancillary services and supporting activities to support business at such developmental areas
The London Plan, while zoning developmental areas into commercial and residential also caters to some mixed-use development.
The plan envisages that the proposed increase in office floor area within the Central Activities Zone and the north of the Isle of Dogs Opportunity Area provide for a mix of uses including housing, unless such a mix conflicts with other policies in this plan.