There has been much coverage of how the political parties plan to address London’s housing crisis, but little focus on another looming issue: the shortfall in offices in the capital.
As London’s economy booms, demand for office space rose by 16% last year, while supply hit a new low - only 12.9m sq ft was available, the lowest level since 2000.
With leasehold office space in short supply, businesses are increasingly turning to serviced offices to offer more flexible rental terms and reduced costs.
Data from serviced office brokers, Search Office Space (SOS), shows that enquiries for central London office space increased by 31% when comparing the first quarters of 2012 and 2015.
Serviced office operators are aggressively looking to open new centres with the knowledge that rising demand and a lack of overall office space will lead to high occupancy and rising revenue. Why then has supply and demand for office space fallen out of sync?
With a population at an all-time high of 8.6 million, the capital is the powerhouse behind the UK economic recovery.
According to a recent report by the mayor’s office, there will be a need for an additional 1.5 million homes by the middle of this century.
This has resulted in controversial changes to planning rules which have decimated the amount of office space available, despite rising demand.
Millions of square feet of offices have been lost since the government made it easier for developers to convert them into homes to try to solve the housing crisis, with new permitted development rights.
With an election looming, the Conservatives quietly abandoned plans to relax the planning rules. The Liberal Democrats, on the other hand, boldly pledged to scrap the policy, with a clear statement in its manifesto to “bring to an end the permitted development rights for converting offices to residential”. Labour, meanwhile, promised to dramatically increase the number of new homes being built, but there is no mention of office-to-residential rights in its manifesto.
Although there are concerns that Labour’s election pledges for a mansion tax and an end to non-dom tax status could drive away foreign wealth, the City will remain an attractive investment opportunity.
Whatever the result of this week’s election, we can be certain that the battle to save the capital’s office space will continue apace.
Emer McCourt, head of content and digital strategy, Search Office Space