M&S Marble Arch: what have we learned?
Making sense of the latest trends in property and economics from around the globe
4 minutes to read
In March 2021, M&S submitted plans to demolish its Marble Arch store and redevelop it into one of London's greenest buildings.
The plans were approved by Westminster Council but were later called in and thrown out by Secretary of State Michael Gove on the grounds that demolishing instead of retrofitting would come with too high a cost in terms of embodied carbon. M&S appealed and the decision was handed over to the courts.
The industry was - and still is - working out how best to manage the trade offs between embodied and operational carbon. Embodied carbon refers to the emissions associated with the materials and construction processes throughout the whole lifecycle of a building, as opposed to simply the emissions released during a building's operational phase. Campaigners in favour of saving M&S Marble Arch generally take the view that the greenest building on any site is the one already standing. The lack of clarity as to how these trade-offs should be managed made M&S Marble Arch a lightning rod for the entire issue.
Judgement day
Luckily for Mr Gove, the National Planning Policy Framework includes "a strong presumption in favour of repurposing and reusing buildings," his legal team argued during the case.
Except it doesn't, and a judge threw out the government's objection on Friday. The NPPF does seek to "encourage the use and reuse of existing resources, including the conversion of existing buildings", but that's hardly a strong presumption in favour of retrofitting. That wasn't the only reason the government lost, but it was one of three central points. For point-by-point legal analysis, I recommend this piece by Zack Simons of Landmark Chambers. Here is Zack:
"What does [the judgement] tell us? That retrofitting is an important and positive focus. But not in every case. And not at any cost. And if the Secretary of State wants to presume strongly in favour of something, he’s actually going to need a policy which says that. Meanwhile, London’s local authorities are beating him to it. The City of London’s latest draft plan describes itself as “retrofit first”, and Westminster is about to consult on following suit."
The London office market recovery
The post-pandemic recovery in the London office market gathered pace last quarter as the volume of lettings rose to the highest level in five years, according to Knight Frank's London Office Market Report.
Occupiers taking flight to better quality offices remains the key driver of performance. Take-up of new and refurbished space hit a record 2.59 million square feet, accounting for 66% of all lettings. The ‘supply squeeze’ for best-in-class space continues to fuel rental growth, and we expect this to intensify given more than 25m sq ft of upcoming lease expiries and with 'named requirements' at a 10-year high.
Strong lettings were evident across the market, with above trend take-up in half of London’s submarkets. The core submarkets of the City Core and the West End Core remain the locations with the highest level of lettings – accounting for c.55% of all lettings in Q4 compared with almost 60% in Q3.
Active demand
Near-term active demand is some 35% above long-term trend, standing at almost 12m sq ft.
Financial services, professional services and TMT continue to be prevalent. Significantly, there are 50 requirements seeking more than 50,000 sq ft and 80% of these requirements are from occupiers seeking more space than they currently occupy. This suggests near-term demand is likely to generate positive net absorption.
This aligns with the team's recent analysis of 102 large transactions in the London market since 2021, which illustrated that most occupiers were increasing their office footprints and that, consequently, these deals had delivered 1.1m sq ft of positive net absorption to the market.
Investor sentiment is turning. Increasing liquidity, particularly in the West End, resulted in a 27% quarterly rise in investment volumes to £1.8bn.
In other news...
Lenders sound the alarm over ‘rapid’ uptick in 35-year mortgages (Telegraph), the Chancellor plays down talk of big tax cuts in pre-election budget (Reuters), Tories wrestle with failure to fix Britain’s housing crisis (FT), London and southeast’s economy ‘to pull further away from rest of UK’ (Times), and finally, UK traders are wary that Hunt's budget risks revving inflation (Bloomberg).