Real estate can and should be driving change in London

COMMENT What are the prospects for the West End and the City of London? The flight of office workers and tourists has hit the heart of London more than any other UK city, as footfall and passenger numbers continue to show. As a director of Stanford’s, a travel and map retailer in Covent Garden, I can confirm that footfall is struggling to surpass one-third of normal levels. It’s the same on the Tube, with passenger numbers down by two-thirds on most working days and lower on Mondays and Fridays. That means 700,000 fewer commuters every day – not eating, drinking or spending money in Zone One. It means a loss of some 18m tourists over a full year. At the start of September there had been a sense that with schools reopening, office workers would return and that theatres and the rest of cultural life could restart, benefitting the hospitality and retail sectors. 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, that had been on hold since the spring. Decisions about how to weather the next six months and decisions about the business environment thereafter. Given all this, what can we expect for the economy in London’s Zone One? Fewer people, but each needing more space Office workers and tourists will 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, for collaborative work and meetings. Owners and occupiers need to work as a team The shift toward turnover rents should not be seen in isolation. It should be one 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. Premises and place management, not just place-making, requires an ongoing commitment. Government – Whitehall and the mayor – should use its convening powers to build on the BPF’s charter and other sector initiatives. Government needs to help reduce fixed costs Business rates in central London are too high and need reform, especially as more landlords move towards turnover-linked rents. The mayor also needs to think about travel costs, such as introducing more flexible travel cards. Returns on investment will be lower, though not everywhere 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 investors’ returns will need to reflect that. Yet as buildings 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 – that has helped turn London into one of a handful of truly world cities. I am optimistic it can once again adapt, but it will need leadership. The real estate sector can and should be part of this change. Mark Prisk is a former MP and housing minister