When it came to property, the main candidates for London Mayor focused most of their campaign policies on how they would address London’s housing shortage. Understandably so, since this was a major concern to the electorate and major employers in the Capital alike.
However, now Sadiq Khan has been sworn in as London's Mayor, there are several commercial property issues that are likely to make their way onto his to-do list, alongside the clear policy commitment to building more homes for Londoners.
Firstly, there’s the question of next year’s Business Rates revaluation. From 1 April 2017, commercial businesses across the UK will see their business rates rise as they become indexed against rents paid in 2015, rather than the current system where they are rated against 2008 rents. With London having experienced some of the largest rental increases in recent years, many occupiers are set to see their rates bills soar. Faced with such rises, some small businesses and retailers may relocate out of the city altogether or look towards the outer zones where rents, and thus rates, will be cheaper.
Sadiq Khan previously called on George Osborne to devolve power over setting London’s rates to the Mayor’s office so the occupant can then offer reductions to businesses that pay the London Living Wage. But we're yet to see if this will be a priority with the occupants of Downing Street. Nonetheless, from next year, the Greater London Authority (GLA) – which consists of the Mayor alongside the London Assembly – is set to be part of a pilot project where it will control and retain all business rates collected in the capital, which it can then redistribute as it chooses. If the Mayor can persuade the GLA, London should therefore have the power to reduce (or increase) business rates as it chooses.
Rate rises aren’t the only issue of concern to occupiers. Commercial rents in the City and West End have risen at a faster pace than occupier output in the majority of industry sectors over the past five years. This could lead to more companies looking at ‘north shoring’, relocating to regional cities to take advantage of lower rents or looking for cheaper space in outer boroughs. Keeping existing businesses in the capital while providing affordable incubator space for the start-up companies and creative industries that contributed to the London success story has to be near the top of the Mayor’s agenda over the next four years.
But the Mayor’s biggest challenge is going to be over land and identifying the sites that will be the pressure release valves for London’s growth over the next 25 years. Large strategic sites are always highly emotive throughout the planning process, but change is inevitable. With pressures on space likely to lead to denser development, retaining the city’s character – one of London’s key selling points – while striking a balance with providing homes and office space at a level that meets demand and future need is going to require some tough decisions to be made.
Sadiq Khan has acknowledged the need to embrace the public and private sectors alike, so let’s hope that he can bring all the parties together to ensure that London continues to go from strength to strength.