The Chancellor Rachel Reeves has been warned that London's shrinking supply of modern office space represents a major economic risk to the capital, which currently supports 2.2 million jobs.
Planning Barriers and Rising Costs
The London Property Alliance has called on the government to recognise offices as essential economic infrastructure to boost London's competitiveness against global rivals like New York, Paris and Hong Kong. The organisation, representing property owners, developers and investors across the City, highlighted that London faces significant planning barriers, rising costs and a shrinking supply of modern office space.
Charles Begley, chief executive of the London Property Alliance, stated: "The Chancellor must take action to support those sectors that serve as the engines of our economy. London's commercial centres power the UK's high-value service industries and their success is inseparable from the country's wider prosperity."
Productivity Decline and Market Shortfall
New analysis reveals concerning trends for the capital's economy. A Knight Frank report indicates the London office market is expected to have a 7.5 million sq ft shortfall by 2028, while prime rents have jumped by approximately 10 per cent in the last year alone.
Meanwhile, Oxford Economics analysis shows Manchester's economic growth now beating London, noting that "nowhere has the productivity slowdown been more apparent than in London" since the 2008 global financial crisis. The capital's productivity growth has been weighed down by large declines across multiple sectors, including high housing costs, a weak pound, restrictive immigration requirements for skilled workers, and high energy costs.
Call for Policy Changes
The London Property Alliance has proposed concrete solutions to address the crisis. The organisation argues that London needs lower business rates to reduce the burden on offices and major retail venues, alongside national planning policy changes that would classify city-centre offices as "critical economic infrastructure" to speed up planning approvals.
This comes as data shows a 54 per cent drop in major planning applications over the past decade, reflecting London's struggle with high construction costs, heavy regulation, unfriendly councils, and general economic uncertainty.
Begley emphasised that the capital must focus on its high-growth sectors to solve the problem, warning against "increasing the tax liability for businesses in high-growth sectors that are dependent on modern office space to thrive and grow."
