'Ghost offices' expose all of London's ills

LondonDazzled by Disney's cardboard cutout London BridgePedestrians strolling west-east along the south bank of the River Thames don't usually pay much attention to a building on their right. It's a kind of large glass bubble, with 18,000 square meters of usable space, which at the time of its inauguration in 2001 was held up as a model of futurism and sustainability. Norman Foster was its architect.

Until 2021, the building was the headquarters of London City Hall, the mayor's office, who left due to the astronomical annual rental cost: €12.9 million, which would have become €14.6 million by 2022. Since then, the building has been closed and fenced, and its continuous glass façade, made up of 3,844 panels, hasn't been wiped down in all that time. Not even all the rain that falls in London has managed to remove the layer of grime that has built up.

It all looks like some kind of 21st-century archaeological wasteland waiting for a planned but postponed renovation to begin. sine dieThey want to build a large shopping center with offices and luxury shops. It's owned by St Martins Property Investments, a company controlled by the Kuwaiti government through the emirate's Investment Authority. The tourist-consumer who sees London Bridge will be the priority target of this new service hub, like so many others, increasingly, in the British capital.

Practically opposite this large Foster bubble but on the north bank of the Thames, another building, this time neoclassical and much older—the old London customs house (Custom House), built between 1813 and 1817—is also empty. Work on the construction of a super-luxury 179-room hotel is expected to begin in the coming months. It is sometimes used as a set for filming advertisements. It was cleared in 2021 and acquired by Jastar Capital, a private investment fund.

These two buildings are just another symptom of a systemic problem in London's property market, impacting both office and residential buildings and explaining why they are so lacking.

According to the real estate and investment consultancy JLLIn the city alone, there are 1.95 million empty square meters; nationwide, more than 3.7 million. To put this into context, this unused space would be equivalent to 30 Buckingham Palaces; a whole new neighborhood and its entire development could be created, with just over 12,000 fifty-square-meter apartments and almost 13,000 eighty-square-meter ones. If all these empty London offices were in a single building, it would be almost 4 kilometers high, twelve times higher than the Shard, the great spire that stands out in the south of the Thames.

All of this is another effect of the pandemic. Teleworking has taken hold in the city. For convenience, but also because it saves employees money on a subway ride that is much more expensive than in New York, for example. An analysis of the think tank Center for Cities He claims that the city's white-collar worker spends only 2.7 days a week in his office. That's up from 2.2 days a week in 2023, he agreed.

The housing shortage in London and across the UK, and the Labour government's promise to create 150,000 more over the next five years, has led experts to question the viability of repurposing empty offices. The conclusion is that the alternative is very complex due to the ownership structure, often in the hands of investment funds seeking large companies to rent their space. The priority is tourism and leisure, not apartments.

Most and least affected areas

By area, the consultancy firm JLL maintains that in Aldgate, in the east, next to the financial City and Liverpool Street, but not part of it, there is a 25.4% vacancy rate for office square meters; in the City, only 5.6%; in Canary Wharf, the other economic district, it is 15.7%; in King's Cross—where Google will open its first headquarters outside the United States later this year, a 60,000-square-meter space in a new eleven-story building that will have 93,000 square meters—there is a 15.1% unemployment rate; and in White City, in the west, there is 14.9% unoccupied office space.

The situation in Canary Wharf is particularly significant. The leases on some of the area's most iconic skyscrapers expire in the next five years. In total, they add up to around 371,000 square meters, according to another real estate auditor, CoStar. These spaces include the HSBC headquarters at 8 Canada Square, which the bank will vacate in 2027 to move to the City, to a much smaller space. The 45-story tower, also designed by Norman Foster and owned by the Qatar Investment Authority (QIA), will undergo a major redevelopment. However, it is currently unknown whether the conversion will include apartments, retail spaces, a luxury hotel, or a mix of these uses.

In any case, resolving the housing issue does not seem possible with conversions like these, neither that of the HSBC tower nor that of any other empty office building. Because a hypothetical 50 square meter apartment at number 8 Canada Square, at current rental prices, and without taking into account either possible inflation or the usual speculation, would cost no less than 700,000 euros in 2030, when the building is expected to be finished.

The same. think tank As we've already mentioned, the Centre for Cities believes that to be able to get a 25-year mortgage at this price, having paid a 10% down payment, you would need to earn between €125,000 and €157,000 gross per year. The average annual salary in London is currently just €57,000.

At the same time, between last year and the end of 2026, 92 luxury hotels will have opened in the UK capital, with 16,600 new rooms. The icing on the cake for tourism and leisure will be the two enormous shopping centers being built in Queensway—this one includes a super-luxury hotel, the Six Senses London—and in Hammersmith. The city is increasingly becoming a giant theme park where future generations, who will have great difficulty accessing housing, will be able to spend much more time in a leisure complex than at home. Because they won't have to.