City Space Race

Balancing the need for housing and office space in cities

City centres have become great places to live, work and play, but in some of our most vibrant city centres, there is not enough land to suit the needs of everyone.

Report published on 21 March 2018 by Rebecca McDonald and Hugo Bessis

In recent decades, city centres have increasingly become vibrant places both to live and work in – particularly our biggest cities. City centres are also places where our most highly productive firms are likely to be located, in new and emerging technology industries as well as high value sectors such as finance and professional services. These firms primarily choose city centres because of close proximity to workers, infrastructure and other firms.

From housing crisis, to office crisis

As the vibrancy and productivity of city centres as places of work and production has increased in recent years, the desirability of these areas as places to live has closely followed. More and more people, particularly those with high-level skills, working in high-knowledge firms, are choosing to live in the same city centres that they work in.

For government, the acute housing crises across our most successful cities has rightly led to a focus on building more housing. But specific policies – such as permitted development rights, which allow conversion from commercial to residential with relative ease – has led to an increase in housing largely at the expense of economically important office space.

This report, supported by DAC Beachcroft, looks at which cities are experiencing competing demands for their land from both commercial and residential users. It explores how recent policies that focus on housing alone have impacted on the commercial offer in those cities, and asks what this could mean for their economies in future, as well as the national economy as a whole. It also explores other areas of planning policy which could be having a negative impact on the ability of highly productive businesses to continue to locate in strong city centres, while cities simultaneously try to develop their urban residential offer.


  • The revival of urban living means city centres face the challenge of balancing the needs for both commercial and residential property. City centres do not have unlimited supplies of land so accommodating continually growing numbers of residents and businesses requires difficult policy choices about which properties to prioritise. Cities must ensure the commercial heart of the city is not squeezed by housing development if they are to continue to provide jobs for people who live in and around them.
  • This has long been a challenge in central London, which has taken the decision to prioritise commercial over residential space, in light of constraints on space. It has been much less of an issue in the centres of other large cities, such as Manchester and Birmingham, despite strong increases in demand for residential and commercial space, because of the large amounts of land they have had available for development. But the recent resurgence of these cities means how land is used is an becoming an increasingly urgent question.
  • Currently, planning policy compounds this threat to commercial space. The sustained prioritisation of brownfield land, combined with opposition to city expansion, means development has not kept up with growth, intensifying competing demands on land. Rather than directly addressing this shortage of land, Permitted Development Rights (PDR) squeeze commercial space further where residential demand is high, by allowing the conversion of commercial buildings into residential usage without the need for planning permission.

Key recommendations

To ensure cities are able to provide the commercial space they need for economic success and to sustain their roles as places of residence, the following policy changes should be made:

  1. Prioritise commercial space in city centres. Building on the exemptions that the Government has already given to selected city centres, all city centres should be offered exemptions from commercial to residential conversions under PDR. While the policy plays an important role in converting disused business space into new homes in suburban locations, it restricts the ability of city centres to provide sufficient commercial space crucial for their future economic growth. Though residential use may generate a greater return than office use for a specific building, conversion is not always the best use of space for the city economy as a whole. To ensure city centres are able to play their role as places of production, the exemptions which already apply in some areas, such as central London, should be extended to cover all city centres.
  2. Relax planning constraints that limit the development of new homes. The green belt restricts the ability of cities to expand outwards, while conservation areas — and protected views in London — constrain their ability to build upwards. These regulations need to be relaxed if our most successful cities are to provide the homes they need without squeezing out space needed for commercial property.
  3. Devolve missing policy powers to big cities. Each part of a city region has a distinct economic role to play. Some are better placed to provide housing while others better suit commercial space. Most city regions with a mayor have formal powers to plan across their areas. But the mayors of the West Midlands and Tees Valley do not. Two things should happen – firstly, the Government should give these mayors the same powers as their colleagues elsewhere. Secondly, other big cities should be given a devolution deal at an appropriate geography so that they can better manage the supply of residential and commercial space.



City Space Race PDF (12 MB)

This report was supported by DAC Beachcroft

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