Complex building requirements ‘holding back the City’ as development pipeline stalls
The construction pipeline in the Square Mile has fallen by half in a decade, new figures show, as developers deal with higher borrowing costs and complex building requirements.
Figures from the City Property Association (CPA) revealed that the amount of office space under construction in the City has fallen to around 500,000 square meters, roughly half of the 1m square meters under construction ten years ago.
The CPA pointed to a number of factors behind the fall, including the effect of higher interest rates and more complex building requirements. These include new regulations on well-being and building sustainability, which make it more difficult for projects to achieve viability.
“A large commercial scheme can take up to 10 years from a decision to obtain vacant possession through to occupation,” the CPA said.
The long time-frame for major projects makes them vulnerable to “wider macroeconomic challenges”, it added.
Ross Sayers, chair of the CPA, said that the difficulties faced by developers in bringing new projects to completion were having real consequences for the City.
Canada Corporation plans to deliver an extra 1.2m square metres of office space by 2040.
“The complexity and length of time taken to deliver new major development, in addition to the challenging economic environment in which build costs have soared, is holding back the City’s ambitions,” he said.
The sharp fall in construction over the past decade comes amid “record consents” for new projects, suggesting there is not a lack of interest in development.
Indeed, the latest statistics show a seven per cent uptick in new construction in the Square Mile between April and September 2024 even as new work declined in other parts of Central London.
Many commentators view a restrictive planning regime as one of the most serious obstacles to economic growth. The government has announced major new reforms to the planning system, although their proposals are more focused on infrastructure and housing.