1. Economics
August 6, 2014

Stratford or the Royal Docks: the race to be London’s third business district

By Martin Tedder

It is almost a cliché these days to write that London’s centre of gravity is shifting eastwards. East London has seen the fastest population growth of anywhere in the UK: unlocking its huge growth potential is the key to realising the Mayor’s objective of making London the best big city on earth.

But while public sector investment has poured in over the last 30 years, the creation of the high value jobs that are all important to London’s future hasn’t spread beyond Canary Wharf. The vast majority of the new jobs springing up in Newham, the next borough east, have been in industries such as retail (think the Westfield shopping centre), or hospitality (think the 2012 Olympics).

This matters. City Hall is pursuing a policy of ‘convergence’: that is, achieving the same social and economic opportunities in the east as in the rest of London. That, in turn, means improving access to jobs.

But prevailing economic forces mean that Newham has its work cut out. When deciding where to base themselves, businesses look to the most accessible locations, both to attract the best staff and to be in close proximity to other companies. Consequently, over the past 15 years, the growth of office jobs has been concentrated overwhelmingly in central London and Canary Wharf.

There are signs things are looking up for Newham. The Financial Conduct Authority (FCA) has pre-let 40,000m2 at the International Quarter in Stratford. Meanwhile China’s Advanced Business Parks (ABP) have established their regional headquarters at Newham Dockside, and recently secured permission for a vast new business park at the Royal Albert Dock. The developer has already received 57 signed declarations of interest from Chinese companies about moving into the proposed business park.

But the fact these investments are split between two different districts could create problems in itself. One of the major lessons of Canary Wharf is that it is very difficult to deliver more than one massive regeneration scheme at a time. It takes huge commitments of money and time to give businesses the certainty they require to invest: both, unfortunately, are in short supply.

Competition is also an issue. When Canary Wharf was in its infancy, it was able to accommodate businesses which couldn’t find space in the City. But, over the next 20 years, the pipeline for office development is estimated to be enough to meet demand twice over. Stratford and the Royal Docks will be forced to compete with central London, Canary Wharf and each other. The obvious question, then, is which of the two new districts will come out on top.

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Stratford is a clear winner on location. It’s just 10 minutes from the City, but is able to offer rents at about 60% of those in the Square Mile. It also has a great retail and cultural offer, with the Olympic Park and Westfield on its doorstep. With the FCA commitment, and with One Stratford Place fully let, the future looks bright.

But a quick review of the new building’s occupants suggests a significant presence from quasi-public agencies: not just the FCA, but TfL, Network Rail and the London Legacy Development Corporation. Is the public sector using its buying power to ensure Stratford’s success? And if so, will private firms follow suit?

An artist’s impression of ABP’s Royal Albert Dock development. Image: ABP. 

The offer at the Royal Docks looks somewhat different. The ABP proposal is intended to be a base for Chinese firms to expand into Europe; it’s even being marketed as ‘London’s Third Business District’.

But there is still a question over whether the Royal Docks are seen as sufficiently attractive to either domestic or foreign-owned firms. The area is half the size of Manhattan: it’ll be hard to coordinate growth or create a coherent sense of place. And London City Airport may be an asset, but it also imposes height and noise constraints.

Perhaps the biggest barrier to the area’s development, though, is its infrastructure. Crossrail will help – but with only one station in an area that stretches for 3km, much of the eastern Royal Docks will still be unattractive to higher value firms. Further improvements in road links are critical, too. Research by Atkins suggests that new river crossings could unlock almost 30,000 jobs in East London, many of them in the Royal Docks and at Stratford. The Centre for London will be reporting on how these crossings can be delivered in October.

Of course, the strong forces sucking economic activity into the city centre make it far from a foregone conclusion that London will see the rise of a third business district at all. If it does, though, Stratford almost certainly has the edge. If the Royal Docks are to succeed, they will need sustained foreign investment underpinned by a strong and unswerving political commitment for many years to come.

Martin Tedder is principal planner at Atkins. He is currently working with Centre for London on the Commission on East Thames Crossings.

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