Office or hotel? Testing the case for conversion in the City of London

According to Knight Frank, City Core office vacancy stood at 5.5% in Q3 2026, falling to 3.9% for new or refurbished space. Prime rents, meanwhile, reached £112.50 per sq ft. For owners weighing office refurbishment against hotel conversion, those figures reinforce the need to understand what an individual building could offer the office market before committing to a change of use.

The forthcoming adoption of City Plan 2040 brings that choice into sharper focus. The City’s Offices Supplementary Planning Document (‘SPD’), adopted in June 2026, will be fully implemented and used in decision-making from the date of City Plan adoption, anticipated in late 2026. The City is already strongly encouraging developers to review the new SPDs when developing proposals within the Square Mile.

The Offices SPD provides detailed guidance on applying the City Plan 2040 office policies, including the assessment of a building’s strategic importance, development potential, demand and viability. For live projects, the priority is to review whether existing marketing, refurbishment options and viability evidence address that guidance, and identify any gaps with the City early. 

At the same time, Destination City remains an important rationale for visitor accommodation. However, it doesn’t replace office-protection tests. The question isn’t simply whether a hotel would be acceptable, but whether the loss of offices can also be justified.

So, what should owners consider before committing to an office or hotel strategy? 

1. Establish the office case first 

The Offices SPD provides guidance on applying the City Plan 2040 office policies, but it doesn’t replace the development plan or introduce a standalone policy test. Decisions will be made against the development plan and other material considerations relevant at the time of determination. The City’s strategic objective is to maintain and grow its significant office role, so retention, improvement or intensification should be considered alongside any case for alternative use. 

Its assessment covers strategic location, type and scale, development potential, demand and viability. A building outside a Cluster, or one that is older or vacant, doesn’t necessarily mean the principle of office protection falls away. Policy OF2’s office loss tests address strategic importance, effects on nearby office development and an absence of office demand supported by at least 12 months’ marketing. Completing this period isn’t an automatic entitlement to change use, and the scope of the evidence, office options to be tested and adequacy of marketing terms should be assessed early. 

Assessment should distinguish a building that performs poorly today from one with no realistic office future. This requires proportionate testing of refurbishment, reconfiguration and alternative office formats, rather than only a Grade A specification. The Planning for Sustainability SPD’s Retrofit First approach also requires serious consideration of retention and reuse, with an optimum strategy also likely to bring together occupier demand, achievable rents, and intervention costs. 

2. Test a site-specific hotel case 

Hotels broaden the City’s visitor offer, support evening and weekend spending and return suitable buildings to productive use.  That positive case should complement, rather than obscure, the justification for losing offices. Locational characteristics, the hotel pipeline and compatibility with neighbouring businesses and properties remain important. 

The GLA’s July 2026 visitor accommodation study identifies a recovery in London’s overnight visits and a more nuanced trading position – hotel occupancy in Q1 2025 remained slightly below Q1 2019.  These London-wide findings aren’t City-specific but show why historic room need estimates shouldn’t stand alone. Developers will benefit from demonstrating demand for the specific product proposed at a particular site, supported by operator interest and realistic assumptions.  

The wider benefits case is stronger where a hotel contributes to the City beyond its bedrooms. Active frontages, publicly accessible food and beverage space and an inclusive, well-connected public realm can help proposals support street-level activity and the City’s evening and weekend offer. These benefits should be integral to the design and operation of the scheme, rather than used as a substitute for demonstrating that the loss of offices is justified. 

3. Assess viability and best use 

The commercial case for a hotel and the planning case for a change of use should be considered separately. 

A hotel may produce a stronger return without demonstrating that offices are unviable, or that policy requirements have been met. Where structural layout, floor-to-ceiling heights, daylight, servicing and upgrade costs constrain office use, these should be tested through costed options and considered against the occupiers a building could attract.   

For developers, the marketing exercise should be used to test whether there’s a realistic office market for the building in its existing or refurbished form. The evidence should explain whether prospective occupiers were deterred by issues that couldn’t reasonably be addressed through refurbishment, reconfiguration or commercial terms. It should also align with design, cost and viability work, so that the evidence presents a consistent position on the building’s future. 

If that work shows a viable office solution isn’t deliverable and the relevant policy tests are met, hotel conversion may provide a suitable long-term alternative use. This will still be subject to site-specific impacts and acceptability.  If evidence remains mixed, developers should avoid committing to a single use too early. Retaining flexibility and confirming the planning position through early engagement with the City can reduce the risk of progressing a hotel scheme that can’t justify the loss of offices or investing in an office solution the market is unlikely to support. 

4. Consider heritage, townscape and views 

The City’s historic fabric, St Paul’s Heights, protected views and the London View Management Framework provide an important framework for shaping height, massing and silhouette. Early consideration of these can help the project team identify when demolition, extension or sensitive adaptation may be appropriate. This is especially the case for listed buildings and older structures.  

Heritage constraints can influence the suitability of a building for either use – they don’t necessarily favour hotel conversion over office retention. The key is to compare the interventions each option would require against the building’s significance, historic layout and fabric. Office refurbishment may require changes to layouts, services and circulation, while hotel conversion can introduce repeated bathroom installations, new service risers and alterations to corridors and escape routes. Testing these requirements early helps establish which use can be accommodated with the least harm. It also helps determine whether that use can deliver a commercially and operationally workable building. 

Early options testing with the City and heritage advisers can help establish which elements should be retained, where adaptation may be acceptable and whether extensions could be accommodated within heritage and protected-view constraints. In the Eastern Cluster, this may identify scope for office intensification, subject to townscape, microclimate, pedestrian comfort, public realm and servicing considerations. Comparing these opportunities and constraints alongside sustainability, operational requirements and commercial viability helps identify not just a preferred use, but a design that can secure the necessary approvals and be delivered. 

Weighing the options for the long term 

That distinction matters as our research shows: demand for high-quality, well-located office space remains strong, but older or more peripheral stock may not meet modern occupier requirements. 

Where location, occupier demand and development potential support investment, office refurbishment or redevelopment may offer the strongest long-term proposition. Elsewhere, proportionate refurbishment or repositioning may provide a realistic office future, where this can deliver space that responds to current occupier demand.  

If proportionate testing shows that office options aren’t reasonably deliverable, hotel or visitor accommodation can be considered. This will depend on whether the office-loss tests can be met and the building can accommodate the proposed use without unacceptable impacts. A secondary location or a constrained building is a reason to investigate the options, not a conclusion in favour of conversion.  

Montagu Evans can bring together planning, heritage, viability and commercial strategy from the outset, helping to establish whether a building has a realistic office future and whether a hotel or another alternative is worth pursuing. By testing options and agreeing evidence requirements with the City early, we help owners and developers identify a preferred route before acquisition assumptions, design expenditure and programme commitments become fixed.