2019 will be a year-long run-in to the mayoral elections, with Sadiq Khan pressured to defend his time in office over housing figures, knife crime and other areas under his watch. But the prospects for the city will hinge to a major degree on what happens with Brexit – and that will be aided by a more positive outlook on London’s fundamental assets and status in the world.
Those were some of the key points to emerge in a fascinating session on predicting how London’s built environment might be affected over the coming year – at the State of the Market event held at NLA last night.
Professor Tony Travers, Director of LSE London said that politics is ‘enormously important’ in shaping the built environment and planning environment in London, but that there had been ‘some rollback’ in inner London particularly against the ‘headlong rush for development ‘that has taken place over the last 15 years. This year, though, will be characterised by Mayor Khan being ‘put under pressure’ on how many homes he has built. So perhaps there will be more decisions in favour of local development than boroughs would otherwise accept, in a ‘pro-development shift’. London is still not affordable for many people, Travers added, with a slight increase in out-migration giving rise to a London that is a ‘bigger version of itself’ covering more of the south east. And although Brexit was ‘impossible’ to predict, Travers felt that a softer Brexit and extended transition appeared to be welcomed by the markets making it more attractive to international investors. The second optimistic point Travers made was that a harder Brexit with no deal and then devaluation may mean London is an attractive place to buy property, which would be ‘not as bad for London as some might think’. The risk to London, however, is that the national political environment is less pro-London than it has been for decades, with the rest of the country having more claims on investment.
Professor Yolande Barnes, Chair, Bartlett Real Estate Institute, said that we are at an interesting moment in London’s history with Brexit coming together with underlying global changes such as the end of the real estate cycle post GFC (Global Financial Crash) recovery. The now prolonged uncertainty since yesterday’s affairs in the House of Commons has been a subject since before the 2016 referendum, which has had an impact such that people at UCL were again talking about ‘brain drain’ – something Barnes had not heard since the 1970s. Housing and affordability was pushing people out, so London has become a more polycentric city, but uncertainty has led to plummeting GDP growth. Fear of recession may mean fewer housing starts; investors, though, will have to be much more focused on what occupiers want, while on big projects like Crossrail and Crossrail 2 we have ‘failed to learn from the success of the Olympics’. Globally, Barnes said she sees many a city and country showing signs that we’re coming to the end of a ‘long, long bull run in land and real estate prices’, but these will not fall from their ‘high plateau’ significantly unless there is ‘a massive economic shock’. All of which make for a ‘very challenging backdrop for the mayor and other candidates’. ‘Unless we find new alternative ways of bringing real estate development forward, the delivery will be almost inevitably invariably going to be subdued over 2019’.
But perhaps we and the surrounding narrative are taking on a too negative focus, said Tony Danaher, Chairman of ING Media and Principal Adviser at the Department of International Trade on Capital Investment. There is, he said, a growing view that we weren’t as good as we hoped following 2012 in mounting large projects. But from the work Danaher has done internationally, cross-boarder investors take a markedly different view of what we have achieved and our prospects and relevance in knowledge transfer to the rest of the world. ‘Equally, they are bemused by Brexit and a few think we have put LSD into the water system’, he joked. International investors look to projects like King’s Cross, Canary Wharf (still), work at Battersea and Crossrail, and London has remained ‘there or thereabouts’ in the world’s five major cities receiving some 50% of the growing capital deployed by institutions. ‘That’s a prize worth hanging onto’. This demonstrates a view on the ‘fundamentals’ of London, said Danaher, including its financial and technical infrastructure, legal system, education and familiarity, and will continue to impact judgments. Mayor Khan, though, has different priorities from his predecessors, despite having a strong team at City Hall. ‘It is not the same as having a mayor who is a civic leader that is accessible to institutions’, he said. ‘Often, it’s illusory, but it matters enormously and you see this in all parts of the world. It takes a person who’s prepared to meet with and work with and understand the deployers of capital to actually change and sustain the city. That is the big challenge for this year and next.’
Responses to these opening points included from Lucette Demets, Head of Urban at London and Partners, who agreed that it was ‘not all doom and gloom’, and that we all have a role to play in changing perceptions. ‘There’s a role for the business community to tell why you are still committed to London’, she said. Grimshaw Partner Mark Middleton wondered whether developers might change their attitude from ‘acquiring, developing and selling and going’ to ownership and that place, neighbourhoods and streets may become more important. And Amelia Staveley, Director of Development and Placemaking at Grosvenor, said London needs to remain competitive through the kind of investment it is making, but that restoring trust in the planning system is the greatest challenge for London.
In discussion, Travers said it was worth remembering the doom predicted if the UK did not join the Euro, but that planning, like migration policy suffered similar problems in that politicians shied away from, and have lost confidence in, explaining how they need to be to sustain economic activity. But on the public realm he said there is very little money available for street improvements that development does not pay for, and that the big split today is not between London and the rest of the country but cities and everywhere else.
Barnes believes that London is ‘best placed to weather whatever storms lie ahead’, although she had concerns that overseas investment particularly from Asia risks creating un-London-like neighbourhoods. And Danaher said that places like Birmingham have learned from London and ‘got their act together on planning’ and harnessing difficult parts of the region. While a no deal might see parity with the dollar and ensuing ‘rape and pillage’, a soft Brexit will result in a normalisation of currency, he added, but investors are waiting to see. ‘There is a lot of Japanese money that wants to come to the UK. It is lined up to come. That is not Brexit-dependent; it is certainty-dependent’.
Other points raised at the event included the need for collaboration and co-creation rather than ‘passive’ consultation; the continuing excellence of the model represented by the Great Estates; the decline of public transport in ‘old’ world cities, with Crossrail 2 in ‘deep trouble’ partially because of the overrun of Crossrail 1, and the problem of neither London nor the UK having a proper ‘balance sheet’ or knowledge of its assets that, were it a private company, would land it in hot water. If London did, said Barnes, it would realise it has ‘immense wealth’, with real estate an important element of that. Finally, the expectation was that Sadiq Khan will get in ‘comfortably’ for a second term, but he has less money than Ken Livingstone and Boris Johnson and ‘curiously weak’ formal powers despite needing to deal with key issues like violent crime and housing. ‘He’s pretty safe, unless something unexpected happens’, said Travers. ‘But he does need to have more delivered by next year’.
By David Taylor, Editor, New London Quarterly