Central London is a busy place and it is getting busier. The CAZ/NIoD is a workplace for millions of employees, and over 150,000 employers of all sectors and sizes. The numbers of both employers and employees are growing. Alongside this, central London is home to a resident population growing faster than the London average. It also welcomes over a million commuters each day, and hosts more than 50 million visits to museums, galleries and other attractions each year. 88
In many cases, the needs of these groups are aligned – all benefit from central London having safe and clean streets, good public services, a range of shops and other amenities such as parks, playgrounds and piazzas. And international reviews tell us that the best city centres are those that can harmoniously accommodate a blend of residents, businesses and visitors. 89
However, juggling these interests is not always straightforward. What is best for residents is not always best for businesses, tourists or commuters, and vice versa. Late-night bars, early morning deliveries, and contractors working evenings and weekends can all trigger tensions and highlight differing interests. Although the CAZ/NIoD is London’s leading business location, its governance is split between the GLA, central government, and 10 different local authorities. Over 85 per cent of the residents that these local authorities are accountable to live outside of the CAZ/NIoD. This can make it hard for employers, commuters and tourists to contribute to discussions about central London’s development, even though they all have a stake inits future.
The research for this report has involved case studies and data analysis alongside roundtables with local government figures, business leaders and property sector professionals. In this chapter, we identify 12 key areas of concern for central London’s future, using case studies to demonstrate how these issues are unfolding both in London and other world city centres. We then lay out a potential decline scenario for central London – which could occur if nothing is done to address specific concerns – before painting a picture of a more positive future and outlining recommendations to achieve this in Chapter 4.
Issue 1: Pressure on space
Space is at an absolute premium in the city centre, and demand is bordering on insatiable. Large sites with development potential are hard to come by, and much of London’s historic core is protected for heritage reasons: for instance, almost three-quarters of the Royal Borough of Kensington & Chelsea is in a conservation area, and Westminster is home to 56 such areas. 90 This can make densification difficult. Additionally, some boroughs are wary of further tall building developments, even outside conservation areas. With space so limited, and much of it protected, central London may increasingly struggle to provide enough space – or respond to rapid changes in the type of space sought by businesses.
Issue 2: Pressure on use
Until recently, the value of residential land in central London has been increasing much faster than land for offices or hotels, incentivising residential construction and conversion over commercial development. 91 The London Plan has given strategic priority to office space in the CAZ/NIoD for some time. Protection from “permitted development” changes of use from offices to homes has limited the scope for conversions, and a recent drop-off in city centre residential values (particularly in prime/luxury developments) may be resetting the balance (see case study below).
However, given that resident numbers have been growing at a faster rate than jobs in the CAZ/NIoD, close monitoring is required to ensure that the district’s strategic economic function is maintained and enhanced in future. The rate of decline in industrial land in and around the city centre – which has created pressure on space for freight consolidation, logistics and other related support activities – demonstrates the importance of taking a strategic, cross-district view of pressures on land use in the city centre. 92
Case study: Shifting incentives for use
The rebalancing viability of residential and commercial uses can be seen in schemes such as Battersea Power Station. In January 2020, plans for 250 apartments in the development were put on hold, with developers proposing that the building in question should be used for office space instead. Later in the year, Wandsworth Council will decide whether to approve these plans to bring an additional 200,000 sq ft of office space to the area.
The prime residential market has been slowing in central London, while demand for office space has remained high. These factors are likely to have contributed to the proposed change, which the Battersea Development Company say would provide “a better balance” between residential and commercial needs. Furthermore, the Northern line extension to Battersea is set to complete in 2021, so better connectivity and capacity will support more commuting to the scheme.
Issue 3: Changing nature of work
The rise of coworking spaces has been notable in central London in recent years. But the nature of office-based work is also changing more broadly, particularly in some of central London’s biggest sectors. Ultimately, despite the rise of flexible hours and remote working, office demands in CAZ/NIoD are likely to be “more, but different”. 93 Trends towards open-plan, flexible space and breakout areas offer the potential to intensify use of office space – and with microbusinesses and startups on the rise, there is also growing demand for affordable and coworking space. However, central London’s historic built environment, much of which is either formally or informally treated as a heritage asset, can make adaptation of this space challenging.
Issue 4: A short-term population
Central London has a higher-than-average proportion of single-person households, short-term residents, and people in their 20s and 30s. With demand for primary school places set to decline in coming years, 94 central London could become increasingly polarised between affluent, childless adults and significantly less affluent families in social housing. The challenges of finding mechanisms to make intermediate or key worker housing viable in the city centre risks accentuating this trend, as does the decline in social housing units (albeit from a comparatively high base). A rise in whole-home short-term rentals is also adding pressure to housing supply. There is a risk that long-term residents, who play an important “stewardship” role in central London, could be replaced by more transient residents who have less of a stake in the area’s continued success.
Case study: Dolphin Square Foundation – providing key worker and intermediate housing in central London 95
In 2017, Dolphin Square Foundation developed 31 intermediate homes for rent at One Church Square in Pimlico. Tenancies are for three years initially, and the required minimum household income to rent a one-bedroom flat is £35,000 (maximum income for eligibility is £65,533).
The development is designed to provide homes for people who work in central London, in organisations that are essential to the capital and its economy, but who may not be able to afford high rents in the area. Analysis of the Dolphin development shows that, while residents work across a number of sectors, there are a high number of public sector workers. For instance, at the Dolphin development teachers make up five per cent of all residents, compared to only 1.67 per cent across Inner London as a whole.
In interviews for this report, employers often raised concerns about the impact of housing costs on the retention of staff, especially those at mid-level. Providing intermediate housing for and ensuring the retention of talented workers in the capital is crucial to maintaining London’s diverse skills pool.
Case study: Paris and short-let accommodation
Paris’s four central districts are the least populated areas of the city, representing only 4.5 per cent of the population and mainly comprised of young adults with high incomes. 96 The city is ranked the joint-most expensive to live in globally (alongside Singapore and Hong Kong), 97 and like London, housing affordability is a major concern. This is true particularly in central Paris, where high prices have been driven by the short-term leasing of private properties: Paris is Airbnb’s second largest market, listing 60,000 apartments. 98 The Mayor of Paris has linked Airbnb’s rise to a shortage of affordable properties available for long-term renting, demanding registration of properties with City Hall as well as a cap of 120 nights a year for Airbnb owners (even going so far as to threaten a total ban in parts of central Paris). 99, 100 Legislation to lower the cap to 60 nights appears to be on the way, despite controversy. 101
Issue 5: Inequality and inclusive growth
Several of the challenges mentioned above are related to the relatively high price of land and property in central London. Although land values have been falling since late 2015, it has been difficult to ensure that affordable workspace and intermediate housing are provided in meaningful quantities in and around the city centre. This in turn creates the risk that pockets of social housing across central London will become increasingly isolated in terms of their surrounding retail and service offering, thereby harming social cohesion. The persistence of deprivation within the CAZ/NIoD suggests that residents are unable to access the opportunities provided by the district’s growing economy. Providing affordable office and commercial space for startups and small businesses in the city centre is a continual challenge, but doing so can help residents to access opportunities and share in growth. However, beyond encouraging new jobs, more must also be done to help residents access existing employment opportunities.
Case study: Affordable workspace to benefit small businesses and residents in Islington
In Islington, the council has identified inequality as a major priority. Although Islington is ranked the fourth most prosperous local authority in England, levels of unemployment and poverty are higher than the London average. 102 As part of a programme to address inequality, Islington Council launched its Affordable Workspace Strategy in 2018. This provides small businesses with high-quality office space at very low rents: in return, businesses must provide social-value outputs for local people such as mentoring or employability programmes. Through Section 106 agreements that raise funds to mitigate the impact of development on a local community, the council has secured nearly 4,000 sq m of office and workshop space in commercial developments. 103 In doing so, Islington Council is working collaboratively to benefit both small businesses and residents – with the ultimate goal of ensuring that wealth and resources stay within the borough and benefit local people.
Issue 6: Environment and sustainability
The largely historic built environment of the CAZ/NIoD can make adaptation to modern or environmentally friendly standards expensive and difficult. There has been some progress on “green roofing” the CAZ, a target set in the London Plan, 104 but successive measures have failed to substantially address central London’s serious issues with traffic congestion and air quality. Industrial land for freight consolidation has been lost at a faster-than-planned rate in and around the CAZ. This means that freight often has to travel further to central London, contributing to congestion and making consolidation of deliveries more difficult.
Case study: Finding new ways to deliver freight at Liverpool Street
Heavy Goods Vehicles that fall short of Ultra Low Emissions Zone (ULEZ) standards are currently required to pay £100 for each trip into the zone. 105 At present, the ULEZ charge area mirrors the Congestion Charge zone, but from April 2021, this will extend to cover the area within the North and South Circular roads.
From May 2020 London’s Liverpool Street station will operate as a freight hub, receiving goods directly from London Gateway Port (in South Essex). This scheme will enable hauliers to avoid the ULEZ and Congestion Charge by bringing goods into central London by rail. There are currently plans to run three round-trip services per day outside peak hours, and estimates suggest that each carriage will be able to carry roughly the same amount as a heavy truck. 101 Once the deliveries arrive by train at Liverpool Street they will be taken to their destination by electric van or cargo bike.
Case study: Working locally to tackle global issues in BEE Midtown
In July 2019, the BEE Midtown BID, which represents an area containing 14,000 businesses, outlined a programme to support sustainability in the area. 107 As a starting point, the BID has adopted some of the United Nations Sustainable Development Goals (SDGs) 108 and partnered with UK Stakeholders for Sustainable Development (UKSSD), a network seeking to accelerate progress on these goals. 109
As part of this programme, BEE Midtown has been working with both businesses and local authorities to improve sustainability in the area. For instance, they have been working with local offices, bars and restaurants to find biodegradable alternatives to plastics, and with local authorities to introduce public water fountains. 110 Through local action on a global issue, BEE Midtown is seeking to evolve from a service organisation to a leadership body for the area. 101
Issue 7: Building an appealing place
Road congestion and air quality are environmental problems, but they also harm central London’s competitiveness as a place to both live and work.In this respect, many of the district’s challenges are of shared interest to businesses, residents and visitors alike. For instance, rough sleeping has been a growing social ill in the capital, with a reported18 per cent rise in 2018/19. 112 Several other areas of clear mutual interest between user groups also exist, albeit for different reasons: antisocial behaviour and noise pollution affect businesses and residents alike, and public realm improvements are in the interests of everyone. Ultimately, all of central London’s user groups seek a vibrant, clean, accessible, and affordable city centre – but the mechanisms to achieve this can still cause great controversy.
Case study: The pedestrianisation of Oxford Street – balancing the needs of residents and visitors
The pedestrianisation of Oxford Street was a flagship policy for Sadiq Khan in the 2016 mayoral election. After winning the election, these proposals were backed by public consultation and initially supported by Westminster City Council. 113 The Mayor argued that, with the changing face of retail, the continued success of Oxford Street could not be guaranteed. Ultimately, air pollution, poor-quality public realm and overcrowding may deter visitors and damage London’s competitiveness on the national and international stage. 114
However, it became clear that that some residents opposed the plans for pedestrianisation, and Westminster withdrew its support. For instance, the West End Community Network (WECN) – which represents 10 residents’ organisations and thousands of residents – opposed the plans on the grounds that buses would be rerouted to more residential areas, which would simply displace congestion and pollution from Oxford Street shoppers to residents. 115 Yet others highlight that there has been a significant reduction in the number of buses on Oxford Street (40 per cent between 2016 and 2018) 116 through the rationalisation and cutting of some routes – not through diversion to residential streets.
In October 2018, Westminster City Council published an alternative plan that included proposals to reduce the number of buses and potentially ban taxis and cars at peak times. The council noted that any changes causing significant disruption to the local area should not be allowed, 117 with the Mayor countering that the council’s proposal simply outlines small cosmetic changes. 118
Case study: The Northbank BID – Strand/Aldwych
The Northbank BID has been lobbying for the redevelopment of the Strand/Aldwych area since 2014. As part of these redevelopment plans, traffic will be removed along a 200-metre stretch to create a new piece of public realm – which will in turn improve air pollution, encourage walking and cycling, and help support education and cultural activities in the area.
As part of the lobbying effort, the Northbank BID invested in some initial modelling and vision work which showed the possible improvements and scale of change. After this, the project was picked up by London First and is now being led by Westminster Council, with the Northbank BID acting as a partner.
A public consultation on the redevelopment plans ran for six weeks in early 2019. As part of the consultation, an online survey was conducted which found that 73 per cent of respondents supported the scheme. 119 Of the 1,400 respondents, the majority were visitors or local workers, with some input from residents and businesses. 101 The project is now fully funded and the planning application could be submitted later this year.
Issue 8: Sharing the load with central London’s visitors
An increasing number of tourists are expected across London – and despite a slight recent drop-off in visits to central London’s attractions, the capital’s core remains the centre of its tourism offer in terms of overnight stays and tourist spend. The night-time economy is also largely concentrated in central London. Whilst both visitor groups contribute substantially to the district’s economy, their presence can also bring challenges – including increased strain on infrastructure, antisocial behaviour (especially in residential areas) and increased policing costs. This is particularly true for late-night visitors to central London’s bars, clubs and pubs, whereby the associated costs are currently borne primarily by employers and residents within the district. The rise of Airbnb presents further challenges in the housing market, leading to an inefficient use of space where it is already short. In addition, commuters and other regular visitors do not have any formal say in central London’s governance or future.
Case study: The Late Night Levy – helping the industry to thrive while protecting residents?
All local authorities have the power to enforce a Late Night Levy on businesses where alcohol is served between midnight and 6am. This contributes to the costs of mitigating the potential negative impacts of late-night drinking, such as increased crime and disorder. The amount of the levy is set at a national level and the charge is calculated according to rateable value. The levy ranges from £299 to £1,493 each year, depending on rateable value, with higher levies for premises that serve alcohol. 121
In London, six boroughs have introduced a levy (all in the CAZ) – the City of London, Camden, Islington, Hackney, Tower Hamlets, and most recently, Southwark. 122 However, the levy is not enforced in the same way across boroughs. In some like Camden, 123 many premises qualify for a 30 per cent levy reduction – including small businesses and premises that are members of local BIDs or are involved in business-led best practice schemes. In other boroughs such as Hackney 124 and Southwark 125 there is no reduction available.
In Southwark, the introduction of the levy in September 2019 caused tension between residents, local politicians and the business community. The three BIDs operating in the area opposed the levy, arguing that they already fund extra police in the area and provide training to businesses to minimise late-night nuisances. 101 Indeed, UK Hospitality, the leading trade association for the hospitality industry, argues that hospitality businesses have boosted regeneration in the area, and that the levy will threaten the industry in Southwark. 127
Case study: Amsterdam and tourism
Tourism is at an all-time high in Amsterdam, one of the most popular travel destinations in Europe. It is particularly concentrated in the central area of the city: in 2017, this area saw 16 million hotel overnight stays, compared to five million in the rest of the Amsterdam Metropolitan Area. 128 However, the scale of Amsterdam’s mass tourism – and increasing concern amongst the city’s residents about the reasons that visitors were coming – has led to calls for a change of focus. Concerns such as antisocial behaviour, over-concentration of public space use and private investors driving up property prices are seen as a threat. 129 The city has launched an “Enjoy and Respect” campaign, which attempts to combat antisocial behaviour, and is experimenting with using technology to promote Amsterdam’s lesser-known attractions and steer visitors away from particularly overcrowded “hotspots”. The implementation of a tourist tax also seeks to mitigate the pressures that can accompany high-density tourism. 130
Issue 9: Changing skills, retail and technological environment
Renegotiating the UK’s relationship with the European Union is a national issue, but is likely to have specific impacts on central London. Businesses in the central district are more likely to employ foreign nationality staff, and are more concerned about the impact of leaving the EU than those throughout the rest of the capital. 131 Important central London support sectors such as construction and hospitality are also more reliant on EU workers than the national average, and retail is also likely to see significant change as a result of automation. 132 Central London’s retail offering has proved comparatively resilient, but automation and the growth of online shopping could still prove disruptive. 133
Issue 10: Fragmented governance
The CAZ/NIoD contains parts of 10 separate boroughs, each of which have different approaches across a wide range of policy areas. These include (but are not limited to) freight consolidation, waste management, policing, roadworks, dealing with homelessness, and some aspects of planning policy. Central London’s BIDs are varied in their purpose and generally reflect their members’ priorities; some interviewees suggested that they have yet to find a meaningful way to work together on shared issues and advocate collectively for the district. A lack of cross-district coordination, beyond the general guidance provided by the GLA and the London Plan, can mean that individual borough policies differ significantly within the CAZ/NIoD – something that several interviewees mentioned could prove challengingfor employers and developers.
Case study: Central London’s BIDs
Initially, most London BIDs were focused on town centre retail areas, 134 but today there is significantly more variety in the types of BIDs active. For instance, there are property owner BIDs, where the levy is paid by owners (not occupiers) of commercial premises, potentially giving them a longer-term perspective. Other examples include tourism BIDs focused on tourism businesses in a specific area. 101
The number of BIDs varies considerably by borough. Westminster has the most, with eight: these include the Piccadilly and St James BIDs, representing both business and property owners, as well as others like Marble Arch BID that are purely focused on businesses. Lambeth has the next highest number of BIDs, with six. Together, Westminster and Lambeth contain a quarter of London’s BIDs, while 17 boroughs have none at all. Whilst much of this distribution reflects the concentration of businesses of a certain size in particular localities across the capital, the emergence and subsequent success of BIDs in central London is also influenced by the relationship between boroughs and BIDs, which is often a function of individuals’ capacity to build positive relationships rather than formal structures to involve BIDs in local decision making. 136 With BIDs designed to be explicitly local in their remit, there is also little working across central London – and whilst much of the CAZ/NIoD is now served by a BID, there are still areas without.
Issue 11: Trust and local opposition
Central London’s residential population is growing, even in the CAZ/NIoD. However, trust between residents and developers is poor, and new developments are rarely welcomed by local residents in an area. A complicated planning system – and a lack of transparency in how and where Section 106/CIL contributions are spent – means that some residents remain unconvinced that the benefits of new development outweigh the negatives and inconveniences. On the other hand, businesses and commuters who rely on central London have an interest in, but little influence over, the district’s evolution.
Issue 12: Funding and powers
Despite all of the above issues, London government is limited in its ability to act. London’s local authorities have been hit disproportionately hard by central government cuts since the financial crisis a decade ago, 137 relying increasingly on developer contributions for public space improvements and other public goods. 138 London government also controls little of the resources that the city raises. 139 Despite the importance of central London to the national economy, Transport for London is now one of the only transport authorities in the world that receives no central government grant for running costs. 140 Although increasing numbers of commuters, tourists and other visitors are expected, London’s government is unable to raise taxes to manage and sustain this growth.
The risks: a central London decline scenario
If poorly managed, a combination of the challenges outlined above could foreseeably lead to a situation of relative decline for London’s city centre. Such a scenario is outlined below, before the following chapter sets out a contrasting positive scenario and some recommendations for getting there.
Market forces, planning restrictions and too much residential development lead to constraints on business space, undermining agglomeration benefits. A lack of affordable workspace makes it difficult for startups and smaller businesses to develop, further damaging the CAZ/NIoD “ecosystem” and leading to a decline in the variety of shops, restaurants and other businesses. An inability to adapt central London’s historic core to the needs of modern businesses – with conservationist concerns to navigate as well as limited space – sees businesses begin to look elsewhere.
This is accentuated by a failure to tackle congestion and pollution, homelessness and other major cross-central London challenges. Businesses start to look elsewhere for relations or expansion, perhaps encouraged by other factors such as more difficult trading conditions following Brexit. At the same time, a narrowing range of retail and services means that London begins to lose out in terms of its buzz and its attractiveness to workers, residents, and domestic and international tourists. Living in London remains unaffordable for key workers like teachers or nurses, and commuting from outside the capital becomes increasingly unappealing, putting a strain on these essential services. Central government is unwilling to grant London’s government the ability to implement measures to raise additional revenue to mitigate the impact of increasing numbers.
Social housing stock continues to decline, and that which remains becomes increasingly isolated, with nearby services catering only for those on medium- to-high incomes. A lack of intermediate housing further accentuates this trend, hollowing out the social structure of the city centre. Both these factors lead to an already young, relatively wealthy, single and temporary population becoming even more so. This short-term population is less likely to play the important “stewardship role” played by residents in successful world cities. Meanwhile, central London’s more deprived communities suffer the negative consequences of growth and real estate development, but are excluded from the benefits. Governance mechanisms to mitigate or remedy this are too weak or lack co-ordination across the CAZ/NIoD; there is a lack of transparency around the process of change, and alienation continues to grow.
Central London does not decline absolutely, but relatively, compared to the centres and Central Business Districts of other world cities. The amount of tax generated in the district is not as high as it would otherwise have been, and the amount that is redistributed around the UK therefore also declines.