BusinessLDN and CBRE’s five-point plan also calls for the Mayor to introduce new 5 – 10% office vacancy rate ambition
The Mayor of London should remove planning barriers to repurposing the capital’s obsolete office space to help tackle the capital’s housing crisis in a move that could deliver up to 40,000 new homes. That’s according to a new report published today by London’s leading campaign group BusinessLDN and real estate services and investment specialists CBRE.
The report, ‘From Vacancy to Vitality’, calls for planning policy across London to prioritise residential conversions for redundant offices that are no longer commercially attractive due to the rise of hybrid working, demand for more modern, tech-enabled spaces and the need to invest to meet environmental goals. An illustrative analysis shows repurposing the 10% of London’s total office space – or three million square metres (sqm) – that has high vacancy rates could create up to 40,000 new homes.
It also calls for the London Plan, the Mayor’s spatial strategy, to include a guiding 5 – 10% office vacancy rate as a bellwether for the health of office locations across the city. Inclusion of this reference point would help to support boroughs in striking the right balance between commercial, residential and other types of development.
Harry Steele, Programme Director for Planning and Development at BusinessLDN, said: “London’s acute housing crisis is costing councils across the capital collectively £4 million a day in temporary accommodation costs. It is also making it incredibly difficult for businesses to recruit and retain the staff they need to grow. Swiftly converting offices that are not fit for purpose into homes would be a quick win for the city as the Mayor updates the London Plan – the capital’s spatial strategy. This will require a coordinated approach by different levels of London government to ensure the capital has enough high-quality commercial spaces in the right places to meet demand, while finding new uses for those buildings that will struggle to attract the investment needed for upgrades.”
Demand for high end office space in the centre of the capital remains strong, but older and lower spec commercial spaces are struggling to attract tenants – particularly in outer London boroughs.
This challenge will be exacerbated by new energy efficiency requirements for commercial buildings due to come into force in 2030. A significant amount of office space – at least 1.1 million sqm in central London – across the capital is due to return to the market ahead of this deadline as large leases expire and is not compliant with the required energy performance certificate rating of B or above.
While the cost of undertaking energy efficiency upgrades – estimated at £370 million in central London – can generally be recouped quickly in prime locations, it is harder to justify such significant investment in locations where demand is weak.
The report also makes the case for clearer guidelines for marketing offices before they can be converted; establishment of a standardised system to track all existing office space alongside approved developments building on the London Planning Datahub; and greater investment from local authorities in training and resources so they are better able to evaluate assessments of whether offices are commercially viable.
Will Lingard, Senior Director for Planning & Development at CBRE, said: “London’s office market is undergoing a structural reset. As hybrid working reshapes demand and sustainability regulations raise the bar for building performance, we’re seeing an increasing divergence between prime assets and secondary stock. Repurposing underutilised offices for other uses, notably residential, isn’t just a market opportunity, but a planning imperative. However, legacy policies around office protection are making the delivery of repurposing to residential difficult for many local planning authorities and in turn, constraining the opportunity to unlock much needed housing across the capital. A more agile, evidence-led approach is needed, one that enables flexibility, supports housing delivery, and revitalises local economies, while preserving the commercial core where demand remains incredibly strong.”
The report details a five-point plan that should be delivered to promote the conversion of redundant office space into homes:
- Introduce a healthy vacancy principle into the London Plan: the capital’s spatial strategy, which is currently being updated, should include an aim to achieve a 5 – 10% vacancy level across office stock which can serve as a north star for policies relating to office space.
- Undertake a detailed analysis of office space need in the capital: the London Planning Datahub should be expanded to encompass information that can contribute to local forecasts of demand for commercial space, supporting boroughs to strike the right balance when backing residential and office developments.
- Standardise marketing evidence requirements: introduce clearer guidelines for proving office space has been marketed before residential conversion can be approved, incorporating defined maximum marketing periods and training for planning officers.
- Encourage viability assessments for offices: improve the ability of local authorities to evaluate assessments associated with meeting regulatory standards, including new energy efficiency standards, to attract tenants, helping determine whether it makes sense to market an office or if conversion to alternative uses is more practical.
- Prioritise residential use for conversions: support residential-led solutions for redundant office space, while recognising that hotel development or student accommodation may be more suitable in some locations.