Central London is bristling with cranes and the skyline is in the throes of manic reinvention.
It’s like 2007 all over again, as though the recession had never happened and boom-and-bust was still gone for good. But what does the visibly revived City and West End office market mean for the London economy, and why are sightings of cranes a rarity outside Zone 1?
London’s commercial activity is concentrated in a few small central areas, where high rents reflect the overwhelming attraction of its global core. The commercial centre is expanding around its edges, to adjacent areas including Paddington, King’s Cross, Shoreditch, London Bridge and the South Bank, with News International reported this week to be planning a move to The Place, next door to the Shard. But the centre is still the only place to be for the majority of businesses. This is a problem for outer London town centres such as Croydon, once home to multi-nationals, now passed over for locations either nearer the action in the centre, or nearer out-of-town airports and motorways. It’s also a problem for small and medium-sized businesses, which provide 50 per cent of London’s jobs but are the most vulnerable to rising rents and redevelopment pressure.
Eric Pickles has just announced that the Government’s plans to ease restrictions on converting properties from commercial to residential use will not apply in central London boroughs, cementing their status at heart of the national economy. However, the need for this exemption illustrates the pressure on property in inner London. Average house prices in London, which have risen 20 per cent since the recession, show the scale of the affordability problem the capital is facing with demand for houses, for sale and rent, outstripping supply. But a few miles along the Thames Estuary, where there is no shortage of land for housing, the Thames Gateway is still waiting for the transformation promised at least 15 years ago.
On average, a house in London costs 12 times the average income, and London is not building enough anywhere near enough new houses for its rapidly growing population. While house prices go up, reforms such as the Affordable Rent model have the potential to limit the ability of many to live in large parts of London. Those in work are also under pressure, with 19 per cent of working adults in London still in poverty.
London faces a number of development challenges, including maintaining the success of the commercial core while spreading the load to other parts of the capital, and finding new ways to build the houses London needs. These urgent problems for London will be the focus for this week’s final session in our London 2030 seminar series, in association with Addleshaw Goddard. A group of experts will meet to debate the challenges London must overcome to give the capital the best chance of future economic success. Look out for our report, based on the seminar series, due for publication in early July.
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