Select Committee on Transport, Local Government and the Regions Minutes of Evidence

Examination of Witness (Questions 372 - 379)




  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 just heard?
  (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 view—although 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 Certainly the Corporation of London was vigorous in suggesting that you were now out of date.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 employers—the 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.

Christine Russell

  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 London—Paddington, 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.

Mrs Dunwoody

  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 around—you 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!

Christine Russell

  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.

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