Re-purposing central London

Mark Priskv2

Contact Mark Prisk
mark.prisk@benoy.com

As the UK heads into another lockdown as a result of a rise in Covid cases, we invited Mark Prisk, Benoy strategic advisor and former Minister of State for Business & Enterprise 2010-2012 and Minister of State for Housing 2012-2013, to share his thoughts on how the crisis is impacting London.

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In recent economic crises, London has fared better than most other UK towns and cities. Not this time. The flight of both tourists and commuters has hit the heart of London, more than any other UK city. 

Tourism had been rising in recent years, with some twenty-one million international visitors in 2019. Their absence this year is leaving many of our famous landmarks empty. Passengers on the Tube are down by two thirds and even lower on Mondays and Fridays. Retailers report footfall at just 30%, compared with over 50% in many other cities. That means 700,000 fewer commuters every day — people not eating, drinking or spending money in Zone One. 

At the start of September there had been a sense that, with schools re-opening, office workers would return. However, when the Prime Minister told the House of Commons that the latest restrictions would be in place for six months, you could feel the mood shift in many London boardrooms and business fora. 

This pandemic isn’t going away and business owners now need to take the difficult longer term decisions: about jobs or investment; how to weather the next six months; and about the business environment thereafter. Given all this, what can we expect for the economy in London’s Zone One?

'Retailers report footfall at just 30%, compared with over 50% in many other cities. That means 700,000 fewer commuters every day — people not eating, drinking or spending money in Zone One.'

Fewer people, each needing more space

Office workers and tourists will eventually return but more slowly and in different patterns than before. However, the total numbers will be lower and will not peak as before. Even when social distancing ends, people will expect less crowding and office workers will need a different working space, specifically for collaborative work and meetings. 

This has implications for the interiors of offices, their layout, ventilation and pattern of use. It also has significant implications for areas dominated by office blocks, such the Square Mile or Canary Wharf. The old business model for those districts has changed and the new model will require different uses, lease terms and pricing if these districts are to adapt. 

Owners and occupiers need to work as a team

There’s been a welcome shift toward turnover rents for many retailers and F&B tenants in recent months. However, this shift should not be seen in isolation. It should be part of a different approach. Landlords and tenants will need to be open with each other and recognise their shared and ongoing interest in making their premises economically viable. 

'There is a buzz - an energy, scale and creativity - which has helped turn London into one of a handful of truly world cities. I am optimistic it can once again adapt as we emerge from this period of uncertainty.'

Village London?

This needs to be delivered as part of an holistic plan for these different business districts. Place-making will need to evolve into active place management, a collaborative, ongoing approach from landowners, occupiers and local civic leaders to enable these districts to adapt and flex to the changing circumstances.

Fortunately, the West End, the City and Canary Wharf all benefit from strong local leadership. The City Corporation has often been an exemplar authority for forward planning. The Canary Wharf Group is similarly focused on managing its whole estate. 

In the West End the freeholders – such as Grosvenor, Howard de Walden or Crown Estates – all actively manage their estates and have the long-term financial perspective needed to manage this transition. Part of this change will be to enable these districts to become more self-sustaining, more village-like. 

New values and opportunities

For decades investing in central London real estate has been hugely popular with investors around the world, driving up prices in some postcodes and sectors. The emerging economy for central London will be smaller and weaker over the next decade than the past one and capital values and investor’s returns will need to reflect that. Yet as buildings their change use and function, some exciting opportunities will emerge. 

Throughout my working life the heartbeat of London’s West End and the City has always been unmatched in this country. There is a buzz — an energy, scale and creativity — which has helped turn London into one of a handful of truly world cities. 

I am optimistic it can once again adapt as we emerge from this period of uncertainty.