Examination of Witness (Questions 372
TUESDAY 5 FEBRUARY 2002
372. Mr Marsh, do you want to say anything by
way of introduction or questions?
(Mr Marsh) Please go straight into questions.
373. Have you got any comments on what you have
(Mr Marsh) Yes, two. Firstly: the LPAC study that
we did in 1998 I believe was an exceptionally robust study in
terms of the findings that then applied still applying now. Although
one can always miss with statistics, the headline statistic is
that when we delivered that report in 1998 the stock of planning
permissions granted was 30 million square feet. At the end of
this year, three years on, the stock of planning permissions is
41 million square feet. The long-term history of the performance
of the London office market over thirty years is that the planning
regime has been remarkably responsive to demand, and it is for
that reason primarily that the long-term trend in office rents
has been down punctuated by occasional peaks, whereas in contrast
in the residential market which operates under a highly-constrained
planning regime the long-term trend is strongly up, with just
the occasional trough. I would also add that the argument that
we do not need to invest in transport because people are not going
to go to Frankfurt is slightly spurious. The state of transport
on a daily basis affects all our lives and the efficiency of London's
business. A company which is forced, if I may use that word, to
occupy floor 6 rather than floor 26 or floor 46 might well prefer
to have a nicer viewalthough I as an employer would prefer
my staff to be working and not gazing at the view; that for them
is nice but not necessary.
374. So you do not feel anything has changed
since your study? Certainly the Corporation of London was vigorous
in suggesting that you were now out of date.
(Mr Marsh) I would say that things have certainly
changed. There has been an immense surge in demand during 1999
and 2000: what proportion of that will disappear with the implosion
of the TMT bubble remains to be seen but the key thing about these
last three years is that in aggregate terms the planning regime
has responded to demand to the extent that there is now more capacity
than there was three years ago. If I may come on to the City Corporation
as such, or the boundaries of the City of London, the Corporation
has been losing the heavyweight employersthe Citibanks,
the HSBCs and Clifford Chance, Lehmans and so on, as you know.
I think it is legitimate for the City Corporation to seek to keep
those companies and those companies which will be million square
foot occupiers in future. However, the Point Towers which are
primarily the issue of public debate at the moment only produce
typically three or four hundred thousand square feet of space,
not the million square feet of space which is required. The work
which I referred to briefly in my little note to you by Legal
& General, in which I played no part whatsoever and I do not
regard myself as expert to present but which is in the public
domain which has been presented to the Mayor, shows that the City
Corporation can deliver buildings of a million square feet and
more without going above about twenty stories. To achieve that
outcome it does require some impinging on the long distance strategic
views of St Paul's, not the tight 150 m width on either side but
the 150-300 m width. It then becomes a political and aesthetic
judgment as to whether encroaching into those sight lines from
St Paul's is good or bad.
375. So what you are telling us is that there
is scope for London to achieve capacity without the tall buildings?
Is that what you are saying?
(Mr Marsh) I am.
376. Would you comment more on the land and
the ownership of Railtrack, particularly around King's Cross,
and tell us what potential you see for that?
(Mr Marsh) Sorry to be technical but most of the land
around King's Cross is not in the ownership of Railtrack but CTRL,
I seem to recall. Coming back to the issue of Railtrack which
is very important, they have on the anvil, if that is the right
term, most of which is not yet in the planning system by virtue
of planning applications or permissions, some 11 million square
feet of development potential in, on and around termini in LondonPaddington,
Victoria, Euston potentially, and other stations. That space,
typically, is envisaged to go up to 25 storeys which would certainly
be intrusive on the skyline in the borough of Westminster, for
example, but is not high in the popular sense of 40 or 50 storeys.
The land which they are sitting on is extraordinarily efficient
land for the obvious reasons of sustainability, access to public
transport, no disruption to existing occupiers, uses or anything
else. If Railtrack is able, in whatever form it might emerge,
to deliver most or all of that space it will make an extraordinary
contribution to the efficiency of the London office market and
to sustainability issues generally, and cutting out the need for
interchanges on the Tube and all the rest of it. They are a critical
player in this whole process.
377. Would you see some of that land being used
for residential as well as offices?
(Mr Marsh) Not above the tracks for operational reasons.
At King's Cross there is the potential there because of the size
of the site and the elongated shape of the site to build offices
close to the public transport interchange and the new Channel
Tunnel rail link station and so forth, and a substantial amount
of housing towards the north of the site.
378. Before we leave that, when British Rail
were given permission to develop at Euston with those rather hideous
buildings, there was a distinct quid pro quo, which I happen to
know about because I was involved, and they were not allowed to
go ahead unless they produced really positive results for the
area aroundyou could argue about whether that was the final
result. Is that what we should be asking Railtrack?
(Mr Marsh) No. Railtrack's first role in life is to
get people to and from their jobs and journeys efficiently and
safely and, following on from that, to develop as much office
space as is consistent with economic efficiency and sustainability.
Arising out of that, to enhance the value of those developments
which they produce, there is certainly good commercial common
sense in helping to create a decent environment round and about,
but I have great difficulty with the idea that Railtrack should
be solving London's shortage of affordable housing or anything
else. They have enough problems.
Mrs Dunwoody: I do not think any of us look
to Railtrack to solve a great deal!
379. Can I ask you what you think the real story
is about the cost of office accommodation? We have had evidence
that the costs are falling but the Mayor quite clearly told us
he thought they were going up.
(Mr Marsh) The real story, I would like to suggest,
is the evidence provided by DTZ Tie Leung, one of the three or
four, along with Peter's firm, elite firms of estate agents and
firms in London, to show that in inflation-accounting terms the
long-term headline cost of offices has come down. Even nominally,
not allowing for inflation, the cost of offices now arguably at
the peak of a cycle in the City of London, is less significantly
than the cost of offices at the peak of the last cycle in 1989.
That is simply a fact.