The future of workspaces | Responding to proposals for the next London plan

The next London Plan will shape how London will develop over the next 23 years (2027-2050). Its early consultation document, ‘Towards a new London Plan’, outlines the ambitions of the Next London Plan and the policy ideas proposed to achieve them.

Our research experts have examined these proposals in more detail, exploring their potential impact on housing delivery, high street, industrial land supply, workspaces, and London’s environmental future.

A CRITICAL JUNCTURE FOR LONDON’S OFFICE MARKET
London's office market stands at a critical juncture, impacted significantly by the emerging London Plan, which outlines the city’s strategic development priorities. The plan, prepared by the Greater London Authority, emphasizes housing, economic growth, infrastructure development, and environmental sustainability. For office owners and occupiers, key impacts include changes in land availability, development flexibility, and infrastructure support.

RESIDENTIAL PRESSURES AND OFFICE SPACE CONVERSION
The London Plan focuses heavily on intensifying residential development, often through converting office spaces to housing. With the government pushing London to deliver 880,000 new homes over the next decade, office owners may face pressure to convert commercial spaces, especially in areas with strong residential market potential. This trend could lead to reduced office availability, when there is an acute shortage of quality office space in centrally located submarkets.

THE ROLE AND EXPANSION OF THE CENTRAL ACTIVITIES ZONE (CAZ)
Central to the plan is the strategic importance of London's Central Activities Zone (CAZ), a primary location for office spaces. An extension of the CAZ could further enhance London's economic dynamism by encouraging mixed-use developments. However, expanding CAZ boundaries presents trade-offs: it could boost economic activity and connectivity but might simultaneously increase congestion, raise costs, and reduce residential liveability. Office occupiers might benefit from better amenities and connectivity but could also face higher operational costs. Revisiting the decision to exclude Paddington from the CAZ could help to further support the office market, leveraging its transport connectivity as both an office and residential location. Similarly, there could be scope to consider extending the Eastern boundary to include Whitechapel, which would support the strategic aims to grow the life sciences cluster in this location.

STRENGTHENING SECTOR-SPECIFIC CLUSTERS
Sector-specific clusters within London have delivered significant economic advantages, fostering innovation, talent attraction, and business growth in specialized areas such as life sciences, technology, and finance. However, the reliance on sector-specific clusters could introduce vulnerabilities. Economic downturns within a sector could severely impact local economies, reduce resilience, and potentially create imbalances in land use. Ensuring diversified economic activity is thus crucial to mitigate these risks.

POLICY GAPS AND MISSED OPPORTUNITIES
To further improve the London office market, the following three recommendations should have been explicitly included in the plan:

1. Greater clarity on affordable workspace provisions: The proposed plan outlines the need for city-wide affordable workspace standards, moving away from the different approaches taken by individual boroughs. Whilst this would bring more co-ordination across London, it can significantly impact the viability of office schemes. There needs to be greater detail and clarity about how off-site provision and financial contributions (in lieu) can be managed, as well as exploring more specific plans to target secondary/tertiary space.
   
   
2. Robust Infrastructure Funding and Delivery: Explicit commitments and clearer funding mechanisms for crucial infrastructure projects like transport enhancements should have been prioritized. Efficient transport networks significantly influence office market attractiveness by improving accessibility and reducing travel times.
   
   
3. Flexible Office Space Conversion Guidelines: Introducing more nuanced guidelines for office-to-residential conversions would help safeguard essential office capacity. Areas critical for London's economic function, particularly around major transport hubs and economic clusters, should have clearer restrictions to ensure sufficient office provision remains.

CONCLUSION: BALANCING GROWTH WITH RESILIENCE
In conclusion, the new London Plan presents both challenges and opportunities for London's office market. Strategic clarity and enhanced policy mechanisms on mixed-use developments, infrastructure delivery, and conversion regulations will be crucial. There is also scope to consider expanding the CAZ boundary to include locations such as Paddington and Whitechapel. By effectively balancing residential needs with commercial viability and economic resilience, London can sustain its global competitiveness and economic vibrancy.