Square Mile: edgier tenants sought for new skyscrapers

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

The office is dead, long live the office. That, at least, is the message from the City of London. It says it will welcome 11 new towers by 2030. With 500,000 square metres of office space being built, and a further 500,000 in the development pipeline, space in the Square Mile may increase by up to a tenth. 

On the face of it, such lofty constructions look misguided. Companies have struggled to get employees back into the office following the pandemic, and it is not yet clear where things will stabilise. 

Indeed, research by Arup suggests that demand for office space will remain below pandemic levels for the next few years. That is true even assuming an increase in rates of office attendance from current levels. Meanwhile, vacancy rates in the City have nudged up to 10 per cent. While nowhere near Canary Wharf’s 20 per cent, that is still a lot of darkened windows. 

Yet there are reasons to hope that the Square Mile might be due a renaissance. Vacancy rates hide a two-tier market. Empty offices tend to be at the grottier end of the spectrum — dingy second-hand rentals, cavernous places with little insulation and so on. These may well drop out of the office market altogether, and — post refurb — reappear as hotels or higher education facilities. 

Demand for offices that people might actually want to go to is much healthier. Vacancy rates at British Land’s flagship Broadgate development are 3 per cent.

Employers, it seems, are hoping that shiny new canteens and gardens will entice their teams back. On top of that, the City is set to attract new workers — 85,000 by 2042, says the Greater London Authority. Some will be bankers — like the HSBC team moving west from Canary Wharf. Many will be in the technology, entertainment and creative industries, which tend to plump for nicer office space anyway.

Yet a cloud still hovers over the City’s high-rise plans. While skyscrapers are no longer the gilded glass cages of the ’90s, they are still pretty soulless. The fear is that no number of winter gardens will entice the coming hoards of techies and creatives to fill their floors.