Chelsea Bloom on the risk factor that doesn’t show up in a standard property prospectus

CANARY WHARF — A commercial real estate analyst I’ve spoken to for years, at a fund that manages a substantial London-focused property portfolio, told me something last month that surprised me only in how plainly he said it: “We’ve started treating planning-approval risk as a line item, the same way we’d treat interest-rate exposure.”

That’s a meaningful shift in how institutional capital thinks about the city. Historically, London property risk models focused on rental yield, tenant covenant strength, and macroeconomic exposure. Planning timeline risk — the possibility that a permitted-development play or a change-of-use conversion simply sits in limbo for years — used to be treated as an occasional annoyance rather than a modelled variable. It no longer is.

The spreadsheet that changed his mind

The analyst walked me through a comparison of two otherwise similar assets his fund had evaluated: near-identical buildings, near-identical tenant profiles, in boroughs with meaningfully different track records on planning turnaround times. The fund priced the asset in the slower borough at a discount reflecting the risk that any future value-add conversion could take, per the pattern documented in reporting on planning delays, up to decades rather than months to realise. That discount, he said, has widened over the past three years as the gap between fast- and slow-moving boroughs has become more visible in the data.

Rental income assumptions have moved too, tracking the wider residential benchmark now sitting near £2,280 a month across the capital, which feeds directly into how funds model tenant affordability and churn risk on mixed-use developments with a residential component.

The transport variable, quietly folded in

Less obviously, transport reliability has started appearing in tenant-retention models for commercial assets, particularly office space aimed at businesses that depend on staff and client access across multiple lines. A property on a line with a track record of the kind of disruption this paper has covered extensively now carries a modest but measurable discount in some funds’ internal models, reflecting anticipated higher tenant turnover as businesses relocate toward more reliably connected postcodes.

What this means for the postcodes losing out

None of this is dramatic in any single transaction. A discount of a few percentage points on one asset doesn’t make headlines. But multiplied across dozens of similar decisions by similar funds over several years, it represents a genuine reallocation of investment capital away from areas that are, on paper, no less desirable than their better-connected, faster-approving neighbours — punished not for what they are today, but for how slowly they’ve historically been able to become something else.

“Nobody wants to say a borough is uninvestable because of its planning department,” the analyst told me, “but that’s increasingly what the model is quietly saying for us.”

The boroughs fighting back against the label

Some councils have taken notice of exactly this dynamic and started publishing planning performance data more prominently, in what property advisers describe as a direct attempt to reassure institutional investors that turnaround times are improving. One outer-London borough now advertises its median commercial determination time on its own economic development website, a level of transparency that would have been unusual five years ago and reflects, if nothing else, an acknowledgement that planning speed has become a genuine competitive factor between boroughs rather than a purely internal administrative matter.

Whether publishing the number actually shortens it is a separate question, and one the analyst I spoke to remains sceptical about. “A borough can publish a good median and still have a long tail of cases stuck for years,” he said. “We look at the tail. That’s where the risk actually sits.”

For the boroughs currently sitting in that tail, the consequence is a slow, largely invisible drift of institutional capital toward their faster-moving neighbours — a process with no single announcement, no press release, and no obvious moment at which local politicians could point to a cause. By the time it shows up in vacancy rates or falling business rate receipts, the decisions that produced it were made years earlier, in spreadsheets nobody outside the fund ever saw.

The analyst’s fund, for what it’s worth, still holds significant exposure to London property. He isn’t advising clients to leave the city. He’s advising them, in his words, “to read the borough’s planning committee minutes with the same seriousness they’d read a company’s board minutes,” which is either a sensible piece of due diligence or a fairly damning statement about the state of London commercial property, depending on how you choose to take it.

I asked which way he takes it himself. He didn’t answer directly, only that the fund had recently hired someone whose job title, unofficially, is planning risk analyst — a role that didn’t exist at the firm three years ago.

He wouldn’t tell me the name on the business card. He did confirm the role reports directly to the investment committee, which tells you roughly how seriously the fund now takes a variable that, five years ago, wouldn’t have made it into the meeting at all.

Whether that shift proves right or overcautious will take years to know for certain. In the meantime, the spreadsheet keeps its discount, and the borough keeps waiting to find out whether it earned one.