Lack of London office space a ‘major economic risk’, Reeves warned
London Property Alliance has called on Chancellor Rachel Reeves to recognise offices as essential economic infrastructure to boost the capital’s competitiveness.
The organisation said that London faces planning barriers, rising costs and a shrinking supply of modern office space, with a 54 per cent drop in major planning applications over the past decade.
“The Chancellor… must take action to support those sectors that serve as the engines of our economy,” Charles Begley, chief executive of the London Property Alliance, said.
“London’s commercial centres power the UK’s high-value service industries and their success is inseparable from the country’s wider prosperity,” he added.
The organisation, which represents the owners, developers, investors and advisors of real estate across the City, said the under-supply of prime office space in the capital is a “major economic risk,” particularly as global companies are increasingly mobile and London faces renewed competition from global city rivals, including New York, Paris and Hong Kong.
This comes as a report by Knight Frank revealed that the London office market is expected to have a 7.5m sq ft shortfall by 2028, while prime rents have risen by around 10 per cent in the last year.
London productivity suffers
London has been suffering from high construction costs, heavy regulation, and some unfriendly councils, as well as general economic uncertainty and a lack of confidence.
London Property Alliance has argued that London needs lower business rates to reduce the burden on offices and major retail venues, as well as national planning policy changes to classify city-centre offices as “critical economic infrastructure” to speed up planning approvals.
New analysis from Oxford Economics shows Manchester’s economic growth beating London, arguing that “nowhere has the productivity slowdown been more apparent than in London” since the 2008 global financial crisis.
It argued that London’s productivity growth has been weighed down by large declines across a range of sectors, including high housing costs, a weak pound, more restrictive immigration requirements for skilled workers, and high energy costs that undermine business competitiveness and reduce disposable income levels.
Begley said the capital must focus on its high-growth sectors to solve the problem, and “avoid the own goal of increasing the tax liability for businesses in high-growth sectors that are dependent on modern office space to thrive and grow.”