- New research comparing London’s economic performance against its international peers reveals its continued appeal as a global destination for investment, alongside mounting structural challenges
- London Property Alliance is urging Chancellor Rachel Reeves MP to use the Autumn Budget to harness the capital’s global competitiveness and deliver on the Government’s no.1 mission to drive economic growth
- Central London’s office market remains buoyant, with the lowest vacancy rate among international peers – two thirds lower than Manhattan’s – demonstrating strong and resilient demand amid constrained supply
- Government action to support the supply of new workspace in central London would unlock significant, much-needed growth
The biannual Global Cities Barometer from London Property Alliance – the body representing central London’s leading developers and investors of commercial real estate – offers a detailed comparison of London’s economic performance against its international peers: New York, Paris, Berlin and Hong Kong.
Its findings paint a mixed picture. London continues to lead Europe in foreign investment, attracting more than twice as many projects as Paris, and demand for high-quality workspace remains robust. Office vacancy rates in central London, combined with leasing data from the City and West End highlight world-leading demand for workspace in the UK capital, alongside a severe and persistent supply-side crunch.
The Barometer also identifies a series of persistent economic headwinds:
- Stubborn inflation and weak growth across key sectors, including construction, finance and insurance
- The highest quarterly rate for unemployment (6.2%) in four years, with London experiencing a weakened jobs market, hiring freezes and pockets of high economic inactivity
- The lowest level of housing delivery since 2014, with London remaining the most expensive city in the UK to build new homes
London Property Alliance welcomes the recent Government announcement of measures to support homebuilding in London, aimed at improving viability through temporary relief from Community Infrastructure Levy and a reduction in the affordable housing requirement before viability assessments apply. However, commercial development in the heart of the capital remains costly and complex – despite its potential to unlock jobs and much-needed growth.
Charles Begley, Chief Executive of London Property Alliance said:
“London’s resilience is remarkable, but it cannot be taken for granted. To sustain the city’s global competitiveness, we urgently need the Government to make development viable. Accelerating the delivery of homes, infrastructure – and importantly – workspaces will stimulate growth, generate jobs and unlock London’s full potential as a leading global city.”
“With 83% of UK economic output and 84% of jobs reliant on the service sector – which office space underpins – there is a strong strategic case for offices to be considered a national economic asset.”
The Alliance calls for decisive Government action to address planning constraints, regulatory uncertainty and rising development costs – all of which act as barriers to investment and productivity. In its submission ahead of next month’s Budget, the body has called for:
- Recognition of offices as a strategic national asset given their central role in the UK’s service-sector economy
The Alliance urges HM Treasury to work with MHCLG to reduce the complexity, uncertainty and cost of engaging with the planning system. This would help deliver the workspaces needed in central London, which underpin productivity and national economic output.
- ‘Fair’ funding of London’s local government
The business group calls for an urgent reassessment of the proposed formula for council funding (Fair Funding Review 2.0) to better reflect London’s needs, while ring-fencing funding for local planning services to attract and retain skilled staff – ensuring timely, high-quality decisions that support growth.
- Business rates reform to support London’s high streets
The Government’s proposal to increase the business rates multiplier for properties with a rateable value above £500,000 risks undermining the viability of bricks-and-mortar businesses, including the capital’s flagship retailers and entertainment venues, whose profitability can be modest despite the higher property values experienced in central London.
- Invest in transport infrastructure to unlock housing growth
Transport investment remains essential to unlocking new housing and jobs. The Alliance urges the Government to back key pieces of strategic transport infrastructure, such as the Bakerloo line extension, to unlock housing opportunities and connect workers with London’s business districts.
