The million sq ft question facing the City of London

London's protected views have long shaped the scale and design of the city's skyscraper clusters. The Leadenhall Building’s distinctive tapered design, which earned it the nickname ‘The Cheesegrater’, preserves an uninterrupted view of St Paul’s Cathedral when viewed from Fleet Street, for example.

The rules* have always represented a tradeoff between protecting London's heritage and promoting economic growth, but when the vacancy rate for the highest-quality office space looks set to drop to zero by 2028 – as our research suggests it will in the City of London – the stakes rise dramatically.

A row has been brewing between the City of London Corporation and Heritage England over The City Plan 2040, which sets a target for a minimum of 1.2 million sq ft of new office space within two tall building clusters by 2040. During the consultation process, the City rejected Historic England’s concerns of severe harm to the Tower of London World Heritage Site caused by the encroachment of tall buildings into views of and from the fortress – you can read details via Hamlins partner Martha Grekos. Housing minister Matthew Pennycook intervened over the summer and directed the Planning Inspectorate to hold further hearings on the matter.

The FT has submissions from the City and Historic England ahead of the hearings. Most notably, the City clarified that previous forecasts of a potential 350,000 sq ft space loss under Historic England's plan were a minimum figure; the actual loss could run as high as 1 million sq ft. This higher figure stems from pressures caused by developers losing the higher floors, which command the highest rents, rendering projects unviable. The hearings are taking place today through tomorrow.

A subdued summer

UK house prices edged up 0.2% in August, up from a 0.1% dip the previous month, Nationwide reported yesterday. That brings the annual growth rate to 1.6%, up from 1.4% the previous month.

It's been a subdued summer. Lenders granted 56,053 mortgages to homebuyers during July, below the 60,800 six-month average and the weakest reading since January 2024, according to Bank of England figures also published yesterday.

"Geopolitical tensions and elevated energy prices pushed mortgage rates higher during the summer, which has weighed on demand in the housing market," said Knight Frank Finance's Hina Bhudia told the Standard. "Leading fixed rates have been broadly stable in recent weeks, with two-year fixed rates as low as 4.45%, but we'd need to see those rates fall closer to four before a more sustained recovery takes hold."

More timely data has been a little more encouraging. Sales agreed remain 6% lower than a year ago, but the gap is beginning to close, according to Zoopla's latest house price index. Searches for homes are now 7% higher than last year, their strongest annual increase for 12 months.

Growing confidence

A meaningful upswing in consumer and business confidence is now well underway. Lloyds Bank's monthly business confidence index climbed 4 points in August to +53%, above its average +47% over ⁠the past 12 months and the best reading since March.

"Overall, businesses are reporting stronger customer demand, greater optimism about the wider economy and growing confidence in their own trading outlook, all of which will be helping to support investment and growth plans," Amanda Murphy, chief executive of Lloyds Business and Commercial Banking, said.

Separate data from the British Chambers of Commerce suggested economic growth should hit 1% this year, up slightly from its previous forecast. Bank of England policymakers including Catherine Mann have also suggested economic growth has picked up since the July meeting. The key question for the housing market is whether stronger growth emboldens the Monetary Policy Committee to raise rates in the face of higher inflation caused by the energy shock.

That will depend on what policymakers call second-round effects: inflation spreading into broader price and wage setting. Governor Andrew Bailey sought to soothe markets on that front at the meeting of central bankers in Jackson Hole, Wyoming, this week. "So far I think we're seeing quite subdued second-round effects," he said, citing the soft labour market.

In other news

Labour shelves plan to restrict foreigners buying new UK flats (FT), Burnham promises change but refuses to rule out tax rises (Times), and finally, Heat pump applications mired in ‘sludge’ of paperwork (Times).

*The City of London has policies on protected views, as does the Greater London Authority, which enforces the London View Management Framework.