The City Property Association (CPA) has today set out a series of proposals to help kickstart stalled development across the City, which despite record consents is struggling to deliver new towers.
Latest statistics show a 7% uptick in new construction in the City between April-September 2024, defying general decline seen across Central London and helping to support an increase in workers across the Square Mile, which at 678,000 is at all-time record and 25% higher than in 2019.
But with increased cost of finance, and increased costs and complexity in the development process, driven by construction inflation and increased demands placed on well-being and sustainability in best-in-class office space, project viability remains challenging.
As a result, the amount of office space under construction in the Square Mile has fallen to approximately 500,000 sqm, roughly half of the 1m sqm development pipeline 10 years ago. The biggest impact is on tall towers which pose additional challenges to delivery.
In its ‘White Paper’ on the issue, Supporting the City’s Economic Growth and Development Pipeline, the CPA has identified four areas where increased flexibility and new ideas can help developers ensure schemes are viable and secure the financing needed to commence construction.
- Phased Community Infrastructure Levy (CIL) payments to reduce risk to delivery timelines and support pre-let agreements
- Reduction in cycle parking provision requirements to better reflect the use of bikes in the City and reduce the carbon impact of major developments
- Offer greater flexibility in how cultural and amenity space is provided to boost viability and better support existing amenities
- Explore further support of circular economy principles and the construction process
CPA Chair Ross Sayers, Head of Development Management, Landsec said: “The City is not immune to the wider challenges facing the property sector, despite strong confidence and soaring consents across the Square Mile. 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.
“We are working collaboratively with the City Corporation to explore ways to help unlock development and ensure the City continues to power the UK economy, attracting corporates, start-ups and talent from across the world.”
The City of London is a critically important driver of economic growth for the UK, generating £97bn GVA annually and providing employment for one in every 48 workers in Britain. A large commercial scheme can take up to 10 years from a decision to obtain vacant possession through to occupation, and the time taken increases their vulnerability to wider macroeconomic challenges.
Development viability has also been challenged by cycling storage targets imposed on the City of London through the London Plan, which will require approximately 24,600 additional parking spaces for bicycles in newly constructed offices, despite CPA research finding that 86% of the existing provision is currently unused.
This would lead to an overprovision of more than 15,800 cycle spaces, generating an excess of almost 20,5000t of carbon emissions (C02e) – equivalent to what seven all-electric City office towers would produce in over 50 years of operation.
This data is set out in a supporting research paper titled Cycling & the City, published alongside the economic White Paper. With the support of member companies, it analyses modal share across eight different buildings, which combined over 600,000 sqm of office space; 70 St Mary Axe, 60 London Wall, 100 Liverpool Street, 22 Bishopsgate, Citypoint, 100 Bishopsgate, 80 Fenchurch Street and 1 Finsbury Avenue.
Ross added: “Whilst we are supportive of cycling, the reality in the City is that use is nowhere near the levels needed to justify the cavernous basements of cycle storage currently required. This adds increased costs and carbon, which for construction are higher at basement level.
“Where there is basement capacity, freeing that up for other uses, or better still not building that space in the first place, makes much more sense than accommodating lines of empty bike racks. We understand the City Corporation shares our concerns on this issue and is liaising with the GLA to help address it.”
