Guidance on Affordable Workspace December 2014

Transcription

1 Guidance on Affordable Workspace December 2014 This paper sets out Islington Council s framework for securing and operating affordable workspace in line with adopted planning policies. The intention is to use it as a mechanism to strengthen local growth sectors and drive the skills and employment agenda. It is intended for reference by council services, prospective developers and Affordable Workspace Providers. It provides the policy context, vision and anticipated delivery mechanism of the council s approach to affordable workspace. It primarily concerns the negotiation of new B1 workspace provision as part of the planning application process. Contents 1. Background p.2 2. Policy context p.3 3. Definitions of Affordable Workspace p.5 Cost Size Priority sectors & planning classification 4. Implementing the policy p.7 Process Proportion of small or affordable workspace to be provided Off-site contributions 5. Design p Key contacts p.11 Appendix 1: Map of Islington s Employment Growth Areas, Town Centres and Employment Priority Areas (General) p.12 1

2 1. Background Islington s entrepreneurial, micro and small businesses play an essential role in the local economy. The council is committed to supporting these organisations and recognises that affordable workspace is a means to do so. Evidence has found significant gaps in the borough s supply of workspaces, particularly for: Small service-based and light industrial businesses serving local communities and other local businesses (including spin-off creative industries unable to afford city fringe locations), Niche sectors requiring flexible premises in key locations (e.g. media and creative industries within the city fringe), and New and young businesses seeking affordable small offices, studios or workspace with favourable lease or license conditions. In recent years, the market has favoured the provision of large offices for corporate customers, as evidenced by the completions and permissions data for larger office developments in the Central Activities Zone. Such workspace provides an important function in the central London economy, but does not usually meet the needs of small and medium sized businesses, start-ups and knowledge-based industries that require smaller, cheaper workspaces. In addition, a number of studies in recent years have demonstrated the importance of retaining economic diversity, which directly supports economic growth, productivity and resilience. These studies have also concluded that areas within inner London (particularly on the fringes of central London), with their mixture of sizes and types of workspace, have an important role to play in supporting the City s world city economy. As such, the provision of flexible premises suitable for small businesses and start-ups is considered to be extremely beneficial, both to the local economy (by retaining sectorial diversity) and to the building owner (by minimising vacancy rates and providing flexibility to occupants). Affordable workspace is important as the demand and cost of employment space in Islington is high. Many small businesses and start-ups with the potential for financial self-sufficiency have particular needs that often cannot be met by the market, either because affordable rents are unviable for the developer, or it is below a standard expectation of return. This has been compounded by a significant loss of office floorspace in the borough over the last decade in particular. There is particular pressure on the conversion of offices to residential use. The introduction of permitted development rights which allows office to residential conversion without explicit planning permission means that these losses have been further exacerbated - a trend which is expected to continue. This pressure directly affects small and micro businesses which account for 85% of businesses in Islington and 17% of all jobs, as detailed in Islington s Core Strategy paragraph Increasing provision of affordable workspace through contributions from developers or in new premises can help ensure more small businesses or voluntary and community sector organisations have space to stay in the borough and expand. Affordable workspace can also provide a mechanism to strengthen emerging growth sectors and advance the council s skills agenda. Enhanced skills provision is fundamental to boosting residents eligibility to contribute to the local economy. Although Islington s business community is thriving and the jobs-to-resident ratio is 1.3:1 (as of 2010), unemployment and worklessness are high and the council s 2014 Employment Commission has heard evidence of a significant skills gap. The allocation and management of affordable workspace can play a role bridging this gap. The council intends to use affordable workspace as a key driver to support a flourishing local economy, skills provision and employment pathways for residents. We want to support our growth sectors and encourage businesses to inform the delivery of sector-specific skills through establishing channels that match skills provision to the needs of emergent industries. 2

3 2. Policy Context Islington Council recognises the crucial role entrepreneurial, micro and small businesses play in the borough and the threat that limited affordable workspace poses to these organisations. Evidence heard by the council s 2014 Employment Commission has identified the key role affordable workspace can play in boosting key growth sectors the benefits of mixed-use workspace to the local economy i.e. residential, commercial and retail startup/affordable workspace the skills gap that exists between the needs of organisations in the borough and resident expertise creates barriers to business growth and resident employment prospects. A recent Scrutiny Review of Business Start Ups in Islington corroborated these findings. Its recommendations included the council establishing a more consistent and co-ordinated approach to providing affordable workspace and developing and monitoring support mechanisms to encourage small business sustainability. The Islington Employment Study 2005 also indicated that around half of all new workspace should be suitable for SMEs. This includes medium-sized enterprises, which are not covered by the Islington s Core Strategy policy CS13 obligation. Adopted planning policy Islington s strategic employment policy, Core Strategy Policy CS13, is supported by spatial policies for key employment areas, particularly those that fall within the Central Activities Zone (Policies CS5, CS6, and CS7). These locations contain the majority of Islington s employment and are projected to be the main areas of employment growth in the foreseeable future. The Core Strategy prioritises provision of small/micro and affordable workspace and ensures new development contributes to the skills agenda: Core Strategy Policy CS13: Employment spaces: The council will provide employment space for businesses in the borough by: A. For new employment space: requiring a range of unit types and sizes, including those suitable for SMEs. B. For existing employment space: Protecting units which are suitable for SMEs in terms of their type and size. C. Requiring development to provide jobs and training opportunities/support as follows: either a proportion of small, micro and/or affordable workspace or affordable retail space, or contributions towards these, from major non-residential developments where the majority of floorspace is not in public education, community or social infrastructure uses. 3

4 Further detail about the approach taken to secure affordable workspace is provided in Development Management Policies and the Finsbury Local Plan. Policy DM5.4 of the Development Management Policies requires major development proposals for employment floorspace (i.e. 1,000sqm or over) within Town Centres and Employment Growth Areas to incorporate an appropriate amount of affordable workspace and/or workspace suitable for occupation by micro and small enterprises. These locations are shown in Appendix 1. Development Management Policies Policy DM5.4: Size and affordability of workspace A. Within Employment Growth Areas and Town Centres, major development proposals for employment floorspace, excluding developments where the majority of floorspace is in public education, community or social infrastructure uses, consistent with the Core Strategy, must incorporate an appropriate amount of affordable workspace and/or workspace suitable for occupation by micro and small enterprises. B. Within Employment Growth Areas and Town Centres, proposals for the redevelopment of existing low value workspace must incorporate an equivalent amount of affordable workspace and/or workspace suitable for occupation by micro and small enterprises, unless it can be demonstrated to the council's satisfaction that the site is no longer suitable for the provision of similar uses. C. Where workspace is to be provided for small or micro enterprises, but is not within physically separate units, the applicant will be required to demonstrate that the floorspace will meet the needs of small or micro enterprises through its design, management and/or potential lease terms. D. Where affordable workspace is to be provided, evidence should be submitted demonstrating agreement to lease the workspace at a peppercorn rate for at least 10 years to a council-approved Workspace Provider. E. Where public education, community uses or social infrastructure (e.g. childcare or health facilities) is provided on-site this will be offset against the overall floorspace requirement for micro, small or affordable workspace. F. In exceptional circumstances, where the proportion of small, micro or affordable workspace to be provided on site does not meet the council's expectation, and where it can be demonstrated that the on-site provision of such workspace is inappropriate or would have an unacceptable impact on the viability of a scheme, financial contributions will be sought to secure equivalent provision off-site, based on a cost per square metre of equivalent provision. In the south of the borough, the Finsbury Local Plan policy BC8 sets out the instances when affordable/sme workspace is required. It applies a similar approach to the Development Management Policies and designates specific areas Employment Priority Areas where affordable workspace is sought. The Finsbury Local Plan has a greater emphasis on securing a mix of employment uses within developments, reflecting the nature and economic profile of the area. In addition, to ensure that workspace is secured for small businesses within very large development proposals of 10,000sqm and over, the thresholds and amounts are incorporated within the policy. These locations are also shown below in Appendix 1. 4

5 Finsbury Local Plan Policy BC 8 B. Within the Employment Priority Area (General) designated on the Policies Map the employment floorspace component of a development or change of use proposal should not be unfettered commercial office (B1(a)) uses, but, where appropriate, must also include retail or leisure uses at ground floor, alongside: i. ii. Office (B1(a)) or retail (A1) floorspace that may be suitable for accommodation by micro and small enterprises by virtue of its design, size or management, and/or iii. For proposals in excess of 10,000m 2 gross employment floorspace, the proportion of micro, small and/or affordable workspace or retail space to be provided should be equivalent to at least 5% of the total amount of proposed employment floorspace. Where on-site provision falls short of the council's expectation, financial contributions will be sought to secure equivalent provision off-site, based on a cost per square metre of equivalent provision, consistent with the Development Management Policy on size/affordability of workspace. The council has also adopted policies in its Local Plan to provide a range of suitable workspaces in terms of type, size and cost for small and medium enterprises, in order to support the growth of the local economy in a way that benefits local businesses, residents, knowledge industries and the wider London economy. The objectives of the policies are to address market failure in Islington s micro and small firm economy, where it exists, in the provision of workspaces and affordable retail space. For workspaces the objectives are to provide opportunities to: Enable the start-up and operation of enterprises with community well-being and social inclusion objectives, for example providing work experience, training and support into employment; Safeguard existing micro and small firms providing goods and services to other local businesses and the community; Enable the germination and incubation of start-up enterprises with potential to create jobs and demand for goods and services. To support this agenda the council is pursuing development programmes that respond to local need and enhance local areas, including those that fall within the Central Activities Zone (CAZ). This includes Bunhill and Clerkenwell wards which make up the Finsbury Local Plan area and are expected to account for the majority of new class B-use floorspace. The CAZ also benefits from an exemption to the office to residential permitted development rights, which means that offices in this location can be afforded stronger protection than those outside the area. 3. Definitions of Affordable Workspace Cost and size are the two primary variables to consider in defining affordable workspace. These two variables are strongly related to each other. However, both are influenced by the type of workspace to be provided which in turn is related to the occupant that the space will be marketed towards, usually determined by the economic clusters in the locality. 5

6 Cost Council policy considers affordable workspace to be where rent and service charges, excluding business support services, are less than 80% of comparable market rates. Realistically though, for many sectors and locations in Islington rents need to be much lower than this to make them affordable to target occupiers. The Council s Business and Employment Support Team will therefore negotiate rents with Affordable Workspace Providers on a case by case basis. Policy DM5.4, part D should be noted. This policy is clear that where affordable workspace is to be provided, a council-approved Affordable Workspace Provider will be sought to manage the workspace. Following negotiation with the council, evidence will therefore need to be submitted by developers demonstrating an agreement to lease the workspace element of the premises to the council at a peppercorn rate for a minimum of 10 years; the council will then sublease the workspace area to an agreed Affordable Workspace Provider. See Section 4 for further details of the workspace negotiation process and offsite solutions. For reference, the Affordable Workspace Viability report (2011) defined affordable workspace as ranging from 1-10 per sq foot and capped at a maximum of 15 per sq foot. This is consistent with other evidence. The City Fringe Partnership (2002) evidenced that in the south of the borough there is considerable demand for properties at less than 15 per sq foot, while Hackney Council (2006) concluded that in Shoreditch between 7-15 per sq foot was considered affordable. As aforementioned, what is defined as affordable will vary dependent on the location and the type of workspace provided. Rents alone vary considerably across the borough from 8 per sq foot in some parts of the north of Islington to 36 per sq foot or more in parts of the south. Furthermore rents can rise considerably in a short space of time. For example, rents for business space in Clerkenwell increased by almost 15% between Size An affordable workspace unit may be a stand-alone premises or a component of a larger workspace area. To maximise flexibility the council encourages developments that comprise a large area of floorspace to be managed as a series of smaller units. However, this creates complexity in determining whether a proposal meets policy requirements. Where the micro/small floorspace component is provided as a single floorplate, the applicant must demonstrate that the design of the development is orientated towards the operational needs of small businesses. It is acknowledged that a unit may be a physical entity, or a component of a larger floor area. The expected areas of affordable workspace units are: Micro workspace units between 10 and 50sqm Small workspaces between 50 and 90sqm Small retail units around 75sqm or less Affordable grow-on workspaces of up to 185sqm supporting micro, growing businesses. Larger affordable workspaces tend to be orientated towards specific sectors (e.g. industrial users). Priority Sectors & Planning Classification Local market analysis has identified key growth sectors 1 which the council will seek to strengthen through Section 106 planning obligations. These include: 1 These priority sectors will change over time to reflect the needs to the local economy. 6

7 Creative and digital Medical science and healthcare Construction Catering and hospitality The council is also committed to Islington s voluntary and community sector and as such this is an additional priority area. Retail units will also be sought through the policy, though since these units are typically small, most will likely be defined affordable by virtue of their size. The type of workspace to be provided will be dependent on a number of factors. Where affordable workspace is being provided as part of a Section 106 agreement, early discussions between a prospective developer and the council are essential to 1) determine the size of the affordable element of workspace; 2) decide which industries are suitable to market the workspace too; and 3) help partner developers with the most appropriate Affordable Workspace Provider - to facilitate the design and planned management of the space. Applicants will also need to specify a use class for the workspace. Affordable workspace will generally fall within the B1 use class, although the council anticipates occasional variations (i.e. D1 workspace). B1 workspace is favourable as it reflects the council s core policy of requiring new floorspace to be flexible to meet future business needs. However clarity will be needed to distinguish which sub-category is being provided within the development. These sub-categories are: (a) Offices, not within Class A2 (b) Research & development, studios, laboratories, high tech (c) Light industry Workspace to be managed as B1(a), B1(b) and B1(c) use classes will therefore need to be identified, along with information about the types of sectors that the space will be marketed towards. 4. Implementing the policy Proportion of affordable workspace to be provided The proportion of small/affordable floorspace be provided within specific schemes will be addressed on a site specific, case-by-case basis, taking into account the cost of development. Seeking to standardise cost and value estimates is problematic, as there are too many unknown variables. These include land values at acquisition stage; the site preparation and servicing costs related to each scheme; possible abnormal site preparation costs such as contamination; the condition of existing buildings where refurbishment would be involved; differences in costs between low and high rise developments; and a wide range of location, site and market specific factors. On top of this, delays due to planning or legal disputes can increase holding costs. As a starting point for negotiation, 5% of the total amount of business floorspace in major developments should be provided as affordable workspace. Consistent with policy DM5.4, part B, where existing low value workspace is proposed to be redeveloped, an equivalent amount of affordable workspace should be provided unless it can be demonstrated to the council's satisfaction that the site is no longer suitable for the provision of similar uses. DM5.4, part E provides flexibility where public education, community uses or social infrastructure (e.g. childcare or health facilities) are provided on-site; this will be offset against the overall floorspace requirement for affordable workspace. Within any particular scheme, the council will accept any form of small, micro or affordable workspace as contributing towards the overall proportion to be provided. As an example, if the council considers that a development should provide 25% of floorspace as affordable workspace, but only 20% is proposed, the 7

8 remaining 5% may be sought through the subdivision of retail units, the provision of additional small or micro units or (where appropriate) an equivalent financial contribution. Off-site contributions Where genuinely exceptional circumstances can be demonstrated to the council that the provision of affordable workspace on-site is a) inappropriate, or b) would have an unacceptable impact on the viability of a scheme, financial contributions will be sought to secure equivalent provision off-site. Off-site provision will be achieved by the council bringing redundant properties into use (e.g. converting vacant garages to workshops), or by the council working in partnership with the voluntary sector to secure improvements to existing workspaces or providing additional workspace. The off-site contribution will be negotiated on a case by case, cost per sqm basis. This will also be dependent on the outcomes of a viability assessment and discussions with the council. Off-site contributions will be used to fund directly, or contribute to, interventions for the provision of replacement workspace or activities that support unemployed residents in a manner congruent with those activities such as bursary grants, business support, business planning and/or networking and partnership events. The council may either operate these workspaces itself or work in partnership with Affordable Workspace Providers (see below). Actions that the council may take in its affordable workspace programme include letting current councilowned property on flexible terms and installing onsite management, and upgrading vacant garages to provide small workshops. The council may also establish an arms-length body, in the form of a development trust, as the vehicle for acquiring, owning, funding, developing and letting properties which meet the demand for small business workspace where the private sector is failing to do so. This is likely to focus on: Acquiring suitable sites and buildings, working up suitable development schemes and working with appropriate providers to implement and operate these schemes Developing managed workspace centres both to meet the needs of specialist sectors and for general users Addressing the collective needs of individual sectors, or where this is not appropriate, marshalling the demand from other suitable groupings of end users with similarly identified workspace needs Maintaining and preserving employment uses within strategic employment clusters. Process Islington Council maintains a Dynamic Purchasing System of preferred Affordable Workspace Providers (AWP), for reference by developers and council services. This list includes organisations with experience across the council s priority sectors and is regularly reviewed to ensure it reflects the needs of Islington s economy. The DPS will be regularly updated, made publicly available and be referenced by council services and potential developers. When individual schemes come on-line, organisations will be invited to submit a proposal for the specific premises. Those organisations not on the preferred provider list will have to complete the DPS application on in parallel with submitting their proposal for the specific scheme. For each scheme, the council will select the most appropriate provider - in dialogue with a developer where affordable workspace is being negotiated as part of a Section 106 agreement. It is preferred that developers pursue a partnership with a council-agreed Affordable Workspace Provider to co-plan, design and eventually manage the affordable element of the workspace. However, developers may also submit proposals to manage the affordable workspace themselves, where they can robustly 8

9 demonstrate they meet the council s aspirations and selection criteria - as set out in the Affordable Workspace Provider Dynamic Purchasing System selection criteria. Once a provider is selected to manage a workspace scheme and providing a successful planning application is secured where a new development is concerned - a head lease will be issued with specified terms, between the developer and Islington Council; the council will then simultaneously grant a sublease to the Affordable Workspace Provider, ensuring the selection criteria are met in legal terms. Please note organisations bidding should be aware of financial considerations relating to state aid. Such considerations mean Islington Council envisions organisations applying for inclusion on Islington Council s Dynamic Purchasing System will likely have charitable or social enterprise aims and objectives. Role of Affordable Workspace Providers Approved Workspace Providers fall into one of the following groups: A local authority or public sector organisation A not-for-profit organisation, community trust or cooperative or charity limited by guarantee A public education provider, or An organisation directly affiliated to one of the above. The offer of Affordable Workspace Providers is wider than just providing inexpensive office space for entrepreneurs and small businesses. Equally important is a provider s approach to supporting the needs of resident businesses and the council s skills agenda. This includes the design of facilities, partnership prospects and co-working; the terms of occupancy and supporting resident businesses; and how the needs of businesses can inform skills development and pathways in to Islington s growth sectors (listed above). Approaches vary depending on whether the provider is catering for businesses that are in incubation stage or looking to expand. Some providers aim to attract businesses at all stages of the cycle. A huge variety exists in models and approaches and Islington Council is keen to attract a range of providers to match the needs of Islington s diverse business community. AWP will therefore manage workspace areas, support the needs of resident businesses and establish channels to promote appropriate skills development. Having a list of interested and qualified workspace providers will give developers assurance that AWP partners can meet the council s priorities. Through working with a provider, developers can also ensure workspace and letting arrangements are designed appropriately (see Section 5, p. 10), reducing the likelihood of underutilised units. Similarly to negotiating the provision of workspace with developers, the council will negotiate rates, affordability and terms of the workspace on a case by case basis with Affordable Workspace Providers at the selection stage for each scheme. On application for the wider development, developers and AWP will need to submit detailed proposals for the management of the workspace, including agreement with the council on: the proportion of affordable workspace (or offsite contributions - see details below) and length of availability of the workspace the types of sectors that the affordable space will be marketed towards rents for different sector/sized businesses marketing and engagement strategy development strategy for accommodated businesses 9

10 links to local skills development monitoring and performance strategy Business rates will be payable as usual for most Affordable Workspace Providers. For details developers and providers are encouraged to visit: Developers are encouraged to contact the council s Business and Employment Support Team (BEST) at the earliest possible opportunity to discuss development proposals and the provision of affordable workspace - see contact details in Section 6. Early partnership work between the developer and the AWP is essential in the satisfactory design of affordable workspace, which will maximise the chances of a successful application. 5. Design Islington Council s desired end result is good value workspace providing small enterprises a platform from which to expand and create new employment opportunities. To fulfil this, a selected Affordable Workspace Provider will need to be subleased premises ready for occupation, as additional fit out costs can make the space unviable for the workspace provider and/or end user. For the most part basic but good quality fit out can be achieved at little or no extra cost to the developer, provided the AWPs requirements are integral to the design process. The key principle is ensuring the AWP is engaged with the design of the workspace at the earliest possible stage. The specifications for the space will be established through a legal agreement. The provision of affordable workspace typically takes the form of making space available to a nominated Affordable Workspace Provider in shell and core, or, ready for use conditions. As a guide to the council s expectations of the workspace, a list of requirements has been developed from previous schemes. While a good quality fit out is essential, it is expected that AWP may suggest alternatives to the following criteria dependent on different needs of Islington s target sectors: Well-lit, modern accommodation with flexibility for either open-plan hot desking or more compartmentalised modes of occupation. The accommodation will be finished to a standard that will allow for immediate occupation including secure entrance(s), heating, lighting, kitchenette(s) and w/c facilities. The workspace to be of regular plan. The space is to be fully enclosed with perimeter walls and consented windows and doors installed. The floors are to be power-floated with a minimum of 5 Kn loading capacity (4+1 Kn). The floor areas will be covered with appropriate carpet tiles or ceramic tiles (use dependent). All soffits and structural columns are to be exposed fair-faced polished concrete or plastered and pointed. All internal walls are to be plastered and painted. Exposed concrete walls, columns and soffits to have snots removed. Where thermal or acoustic insulation is applied to soffits the finish is to be suitable for decoration. The accommodation is to be mechanically or naturally ventilated depending on planning policy requirements. If the space is configured over more than one storey the position and size of internal stairs and lift openings is to be agreed with the workspace provider. Floor-to-ceiling heights and natural light provision is to be as generous as possible. There should be a minimum floor-to-ceiling height of 3m. All statutory services are to be supplied to the accommodation, capped and tested and separately metered. All drainage is to be installed and connected. 10

11 The workspace shall be in compliance with all BREAAM Very Good rating pre-qualification and post qualification testing and certification. The workspace is to comply with all relevant accessibility regulations and requirements. The number of secure cycle spaces will be in compliance with Islington s requirements and shall include both visitor and public cycle parking spaces. Access to end-of-trip facilities for cyclists shall also be provided. Disabled parking, bicycle storage and arrangements for loading and unloading to be agreed. Electrical supply to be 3 phase. The position of SVPs intruding into the space to be agreed with the AWP and the use of SVPs with bends and rodding eyes to be avoided as far as possible. The position of capped supplies for gas, water and electricity to be agreed with the AWP Conduit to be installed through perimeter walls suitable for incoming data cabling and any required way leaves completed. The position of drainage outlets to be agreed with the AWP. On specific projects other issues may need to be considered, such as the co-ordination of fire alarm provision, access control arrangements, landscaping design and mobile phone signal strength. 6. Key contacts Pascal Coyne, Business and Employment Support Team Pascal.Coyne@islington.gov.uk Wilf Langridge, Strategy and Community Partnerships Wilf.Langridge@islington.gov.uk Ben Johnson, Planning and Development Ben.Johnson2@islington.gov.uk Jonathan Gibbs, Planning and Development Jonathan.Gibb@islington.gov.uk

12 Appendix 1: Maps of Islington s Employment Growth Areas, Town Centres and Employment Priority Areas (General) Employment Growth Areas and Town centres 12

13 Employment Priority Areas 13