New London Architecture

Market cools for tall buildings but will the temperature rise high again?

Monday 24 June 2024

Stuart Baillie

Head of Planning
Knight Frank

Stuart Baillie, Head of Planning at Knight Frank, discusses the significant change in investor and developer sentiment towards 20-storey plus tall buildings.

At Knight Frank, we have seen a significant change in investor and developer sentiment towards 20-storey plus tall buildings. The boom times of the 2010s have certainly tapered into the 2020s. However, market interest is nuanced and partly a symptom of wider sector pressures as well as politics and policy. 

Tall buildings for conventional flatted developments, including build to rent have been impacted by build costs, fire safety, forward funding, and pricing uncertainty, meaning many schemes have stalled or required re-engineering. Consented schemes are having to be adapted to accommodate second stairs, which can be difficult to retrofit into a consented design without materially altering the unit mix and building design. 

London Plan tall building design policies are also more restrictive, putting additional pressure on build costs and affordable housing viability; in particular, late-stage review mechanisms are dampening investor interest. Ultimately, many 20+-storey schemes in the pipeline are no longer viable, but our KF Planning teams are still seeing activity on lower-rise 8-14 storey developments.

Purpose-built student accommodation and, more recently, co-living schemes are bucking this trend. These are formats that do work at scale and continue to attract funders. We are being asked to consider options to convert existing consents to these formats, and historic Planning Authorities are becoming more cooperative in good accessible locations. 

In the commercial office market, the sentiment is more specific to locations. The City of London continues to deliver its pipeline of tall buildings driven by a flight to quality and improved environmental / energy performance. Law firms and financial institutions are the key occupiers driving this trend. However, more tertiary locations are seeing limited interest in planning schemes mothballed or looking for alternative options.

Canary Wharf is also synonymous with tall buildings, and it is experiencing significant change with commercial fringe opportunities going to residential-led development formats instead of offices. The government has pledged funding to facilitate the burgeoning interest in Life Sciences here, where we at Knight Frank have been advising on both new build and conversion opportunities within the commercial core. 

Uncertainty relating to'retrofit first’ planning policies has frustrated investment in redeveloping ageing office stock. A clearer position should emerge from recent test cases such as M&S Marble Arch, and greater flexibility in Permitted Development Rights is also generating significant interest in converting existing commercial buildings into residential use.

Clearly, the declining appetite for tall buildings has been most keenly felt in the residential sphere, but housing needs and a resurgence in the UK economy should bring renewed interest. Planning policies may need to be flexed to help unlock less viable projects and speed up brownfield developments, but a major frustration for the private sector is the timescales for securing planning permissions and the political interest in the planning decision process.  Local authorities struggle with the resourcefulness and contentiousness of designating sites for new tall buildings, and there is significant risk and uncertainty in taking tall building proposals through the planning application process. 
Therefore, even in a more positive economic cycle, the general trend may well be towards mid-rise rather than high-rise.

Stuart Baillie

Head of Planning
Knight Frank

Tall Buildings



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