The City of London is to consider relaxing the Square Mile's strict planning requirements that protects existing offices to encourage alternative uses for secondary buildings increasingly at risk of obsolescence.

The review is part of a look at the City Corporation's City Plan and how it responds to the changing office market through to 2040. A meeting of the Corporation's Local Plans sub-committee on 20 June will consider recommendations made by the Future of Office 2023 report.

The most significant recommendation in the Arup report, commissioned by the Corporation, is the introduction of a "fast track" planning approach to ensure more "diverse and inclusive spaces" are built and to enable the introduction of more alternative uses by reducing the requirements needed to support the loss of office floorspace.

At previous sub-committee meetings in April and May, the Corporation has already discussed the principle of this approach for some applications, such as where the proposed use would retain much of the existing fabric and embodied carbon of a building and where the use would meet other key City Plan or Corporation priorities.

At the moment, the Local Plan and the draft City Plan policy protects "suitably located and viable office floorspace" by requiring two types of evidence to support a loss of office floorspace. Marketing evidence is used to assess whether there is interest from occupiers in the space, while viability evidence assesses whether continued office use would provide a viable return for the landlord.

A fast-track planning approach would remove these mechanisms but City officers have already said that they think the marketing requirement should remain.

Arup's report says it is increasingly clear that occupiers are looking for greater variety in terms of land use, including complementary facilities to make offices more appealing to employees. Developers and building owners are also looking for greater diversity in terms of rental income, it says.

The report says: "a ‘fast track’ planning approach could help deliver more diversity and inclusivity and alternative uses. The uses should be complementary to the City’s primary business role and could include hotel and visitor accommodation or cultural space, educational space, particularly for business-related uses, new publicly accessible open space and space within buildings, including rooftop space and viewing galleries."

The City adds that the approach would not remove the policy which protects suitably located office space.

Ahead of the meetings the Corporation said the report highlights a number of ways the office market in the country's key global business destination has been changing.

The Corporation says 22% medium to large firms (50-plus employees) in the City now belong to the "emerging" office-based sector, increasing from 15% in 2015. It says these firms – in information and communication and professional, scientific and technical activities – tend to value different types of office spaces compared with traditional office-based firms and this might imply a shift in the market.

Grade B office take-up is predominantly by creative and emerging-office based firms who are interested in improved amenities. The Corporation says the protection of existing offices is vital to ensure there is a range of office stock to provide choice in terms of location and cost to occupiers. But it points out stark challenges facing Grade B offices.

It says in 2022, take-up of secondhand Grade B space in the City was 10,000 square metres (108,000 square feet), accounting for only 2.2% of all leasing market transactions. It says pre-pandemic, Grade B office stock provided an affordable workspace option for small businesses but this area of the market has not recovered. There are also challenges for retrofitting Grade B space although it highlighted successful examples in the City, such as Millennium Bridge House, 81 Newgate Street and Ibex House.

The Arup report highlights the increasing tough demands from government around the energy efficiency of buildings. Restrictions come into effect in 2026 that will prevent the letting of commercial buildings that fall below EPC Grade C and this accounts for approximately 10.8 million square feet of offices in the City.

Without improvement, there is potential for some existing buildings to become "stranded assets" requiring either redevelopment or change of use to alternative uses, the report adds.

The Corporation says the City is continuing to experience an increase in demand for high quality sustainable
office space, including office space to meet current needs such as co-working, flexible and serviced.

Employment is also projected to continue growing, with the Greater London Authority forecasting jobs in the City of London to grow to 733,000 in 2041.

Office workers have adopted new patterns, with in-person attendance levels highest on Tuesdays to Thursdays, and some Monday. It adds that office needs are changing with occupiers valuing different types, including agile working environments with meeting spaces for collaboration, quiet spaces for calls and within amenity-rich areas.

The Corporation says the City is experiencing a gradual return of its office-based workforce, with London underground ridership into the City showing average levels around 68% of pre-pandemic levels and up to 75% in the middle of the week. This trend has been stable since January 2023. Tuesday, Wednesday and Thursday are the busiest days with growing attendance levels on Mondays.

The “Future of Office Use” evidence base produced by Arup outlines three scenarios for the demand of office floorspace in the City.

The three scenarios are:

• Return of in-person assumes that pre-pandemic working habits resume, with most workers coming back to the office (at 80% of 2019 levels), with a slight preference for mid-week days. Projected employment from this scenario aligns with GLA projections.

• Hybrid peak sees office workers coming around 2.5 days a week (65% of 2019 levels) with a high concentration between Tuesday and Thursday and rather empty offices the rest of the week. Again, projected employment growth aligns with GLA projections.

• The new diverse City scenario projects lower attendance (50% of 2019 levels) but with a more even dispersion of workers throughout the week, allowing for "optimisation of office space and space in excess being taken over by new entrant firms". This greater utilisation of the office stock would allow for a growth in employment of 147,000 jobs by 2042. This diverges significantly from GLA projections and would have significant implications for transport and ways of working.

In terms of office floorspace requirements, the three scenarios require different amounts of office space by 2042. The projections are: return of in-person requires 20 million square feet; hybrid peak requires 13 million square feet; new diverse City requires 6 million square feet.