Technical consultation on planning

Transcription

1 Technical consultation on planning Consultation response form We are seeking your views to the following questions on the proposals to streamline the planning system. How to respond to this consultation Please your response to the questions in this consultation by 26 September 2014 to Alternatively you can write to: Planning Consultation Team Department for Communities and Local Government 1/H3 Eland House Bressenden Place London SW1E 5DU When you reply please confirm whether you are replying as an individual or submitting an official response on behalf of an organisation and include: - your name, - your position (if applicable), - the name of organisation (if applicable), - an address (including post-code), - an address, and - a contact telephone number 1

2 (i) Your details Name: Organisation (if applicable): Address: Post Code: Address: Mayor of London Greater London Authority City Hall, The Queen's Walk, London SE1 2AA Telephone Number: (ii) Are the views expressed on this consultation an official response from an organisation you represent or your own personal views? Organisational response x Personal views (iii) Please tick the one box that best describes you or your organisation Public Authority: District/Borough Council London Borough Council Unitary Council County Council National Park/Broads Authority Parish/Town Council Other public sector (please specify) Mayor of London Voluntary/Community: Designated neighbourhood forum Community organisation 2

3 Voluntary/charitable sector Residents Association Other (please specify) Retail (A1) and Financial and Professional Services (A2) Business: Bank/Building society Estate agent Professional service Betting shop Pay day loan shop Existing A1 retail/shop Other A2 (please specify) Other: Land Owner Developer/House builder Developer association Professional institute/professional e.g. planner, consultant Professional Trade Association Local Enterprise Partnership Other (if none of the options in the lists above apply to you, please specify here) 3

4 Contents 1. Neighbourhood planning 5 2. Reducing planning regulations to support housing, high streets and growth 9 3. Improving the use of planning conditions Planning application process improvements Environmental Impact Assessment Thresholds Improving the nationally significant infrastructure regime 49 4

5 1. Neighbourhood planning Please refer to the relevant parts of the consultation document for narrative relating to each question. Would you like to respond to the consultation on neighbourhood planning? Time limit for taking decisions on the designation of a neighbourhood area Question 1.1: Do you agree that regulations should require an application for a neighbourhood area designation to be determined by a prescribed date? We are interested in the views of local planning authorities on the impact this proposal may have on them.. The prescribed time should take account of the time needed for a local authority to consult and consider the responses received, as well as the timescale for reports being submitted to LPA s decision-making meeting. Question 1.2: If a prescribed date is supported do you agree that this should apply only where: i) the boundaries of the neighbourhood area applied for coincide with those of an existing parish or electoral ward; and ii) there is no existing designation or outstanding application for designation, for all or part of the area for which a new designation is sought? i) ii) Question 1.3: If a date is prescribed, do you agree that this should be 10 weeks (70 days) after a valid application is made? If you do not agree, is there an alternative time period that you would propose? The prescribe date should allow for processes outline in answer

6 Question 1.4: Do you support our proposal not to change the period of six weeks in which representations can be made on an application for a neighbourhood area to be designated? If you do not, do you think this period should be shorter? What alternative time period would you propose? Further measures Question 1.5: We are interested in views on whether there are other stages in the neighbourhood planning process where time limits may be beneficial. Where time limits are considered beneficial, we would also welcome views on what might be an appropriate time period for local planning authority decision taking at each stage. Pre-submission consultation Question 1.6: Do you support the removal of the requirement in regulations for a minimum of six weeks consultation and publicity before a neighbourhood plan or Order is submitted to a local planning authority? Question 1.7: Do you agree that responsibility for publicising a proposed neighbourhood plan or Order, inviting representations and notifying consultation bodies ahead of independent examination should remain with a local planning authority? If you do not agree, what alternative proposals do you suggest, recognising the need to ensure that the process is open, transparent and robust? Consulting landowners Question 1.8: Do you agree that regulations should require those preparing a neighbourhood plan proposal to consult the owners of sites they consider may be affected 6

7 by the neighbourhood plan as part of the site assessment process? If you do not agree, is there an alternative approach that you would suggest that can achieve our objective? Question 1.9: If regulations required those preparing a neighbourhood plan proposal to consult the owners of sites they consider may be affected by the neighbourhood plan as part of the site assessment process, what would be the estimated cost of that requirement to you or your organisation? Are there other material impacts that the requirement might have on you or your organisation? We are also interested in your views on how such consultation could be undertaken and for examples of successful approaches that may have been taken. Introducing an additional basic condition to test the extent of consultation Question 1.10: Do you agree with the introduction of a new statutory requirement (basic condition) to test the nature and adequacy of the consultation undertaken during the preparation of a neighbourhood plan or Order? If you do not agree, is there an alternative approach that you would suggest that can achieve our objective? Strategic Environmental Assessment Question 1.11: Do you agree that it should be a statutory requirement that either: a statement of reasons, an environmental report, or an explanation of why the plan is not subject to the requirements of the Strategic Environmental Assessment Directive must accompany a neighbourhood plan proposal when it is submitted to a local planning authority? 7

8 Question 1.12: Aside from the proposals put forward in this consultation document are there alternative or further measures that would improve the understanding of how the Environmental Assessment of Plans and Programmes Regulations 2004 apply to neighbourhood plans? If there are such measures should they be introduced through changes to existing guidance, policy or new legislation? Further measures Question 1.13: We would like your views on what further steps we and others could take to meet the Government s objective to see more communities taking up their right to produce a neighbourhood plan or neighbourhood development order. We are particularly interested in hearing views on: stages in the process that are considered disproportionate to the purpose, or any unnecessary requirements that could be removed how the shared insights from early adopters could support and speed up the progress of others whether communities need to be supported differently innovative ways in which communities are funding, or could fund, their neighbourhood planning activities. Question 1.14: Are there any further comments that you wish to make in response to this section? 8

9 2. Reducing planning regulations to support housing, high streets and growth Please refer to the relevant parts of the consultation document for narrative relating to each question. Would you like to respond to the consultation on reducing planning regulations to support housing, high streets and growth? Increasing Housing Supply Question 2.1: Do you agree that there should be permitted development rights for: (i) light industrial (B1(c)) buildings and (ii) storage and distribution (B8) buildings to change to residential (C3) use? Granting these permitted development rights for either B1(c) and B8 use classes poses a series of problems both in implementation and in supporting an appropriate balance between the three roles of planning set out in NPPF para 7. The proposed change will complicate the planning system, lead to unwarranted increases to the cost of doing business, place constraints on business and industrial activities, and cause significant damage to the economy of London. Scale of Impact There are significant differences between the values of industrial and residential land in inner and outer London. Residential land values are typically 3 to 7 times the industrial land value in inner London, and 1.5 to 2 times the industrial land value in outer London 1. The absolute differentials in values are also significant, as shown in Table 1, residential land values can be as much as 7 million/ha higher than industrial land in inner London and 3.6 million/ha higher in outer London. Due to the large differential in land values it is likely that the introduction of the proposed 1 Source: VOA Property Market Reports /GLA analysis Residential: Small sites (<5 houses) ( ); Suburban site, 0.5ha ( ) Industrial: Bulk values ( ); Cleared industrial site, hectare ( ) 9

10 permitted development right will lead to large-scale loss of industrial land across London. Table 1: Differential in land value per ha between residential and industrial land 2 Location /ha ( average) /ha ( average) Inner London Islington/Hackney 4,600,000 - Southwark 6,970,000 - Outer London Merton/Mitcham 3,600,000 - Croydon - 1,154,000 Enfield - 1,800,000 London s industrial areas accommodate over 550,000 jobs or approximately 11% of London s total employment 3. t all of these are industrial, but all are dependent on reasonably priced and functionally unconstrained business space. The proposed unplanned approach will allow the pepper potting of residential uses next to noisy industrial and heavily serviced logistic uses. As well as presenting a very poor quality of life for residents, this will create management problems for local authorities, which will then have to constrain the operations of extant, authorised industrial operations. Even an increasingly service-based economy needs space for less high-value activities crucial to sustaining the city s life e.g. services for the service sector supporting all of London s top level office and management functions. The Central Activities Zone (CAZ) office market is highly dependent on the essential services provided by businesses located in the CAZ s hinterland. These lower value added activates are dependent on the availability of cheaper industrial premises located in clusters around central London. The potential scale of economic loss of an unconstrained development right for B1(c) and B8 uses is therefore greater than just its effects on industrial business and employment, but threatens the servicing of higher value added businesses located in central London; and will raise London s already high costs of business relative to its international competitors. Practicality The particular difficulty of this proposal relates to the definition of the B1(c) use class. The amended Use Classes Order defines B1(c) uses as any industrial process that also meets the requirement of being a use which can be carried out in any residential area without detriment to the amenity of that area by reason of noise, vibration, smell, fumes, smoke, soot, ash, dust or grit. Use B2 is then derivatively defined as including all other industrial uses not falling into B1. 2 Ibid. 3 URS/DTZ. London Industrial Land Baseline,

11 Given the subjective nature of the division between B1 and B2 uses, attribution to a particular class is by means of consensus views set out in land use gazetteers or other unofficial publications. These distinctions however, are not set out directly in legislation so that the determination of B1(c) or B2 use class is ultimately subjective, and the difference between B1(b) and either B1(a) or (c) even more finely balanced. r is this uncertainty generally resolvable by means of planning history searches as many industrial uses pre-date the planning system. In the absence of a development right for C3 this fineness of distinction has been generally unproblematic due to the closeness in commercial value between general and light industrial uses and the similarity of their treatment in planning policy. The introduction of the proposed development right, however, will lead to lengthy disputes over the whether a premises is in B1(c) or B2 use class. Viewed as a whole, the effect of the proposed development rights is far greater than is implied by the administrative nicety of a neatly subdivided B1 class and functionally separate B2 use. The likely result is essentially to eliminate planning management of the vast bulk of industrial land in London. Negative effect on housing delivery Vacancy constitutes only 7.3% of core and wider industrial stock across London 4, a low figure compared to the 9% or so normal in a healthy land market. The London Plan has actively managed the release of surplus industrial stock in co-operation with boroughs and has maintained a very lean industrial land policy, with a continuing release of 733 ha planned from 2011 to Much of this land is being released as part of London s 38 Opportunity Areas which, as part of a co-ordinated planning process between the Mayor and the local planning authority are planned to provide at least 300,000 houses and 568,000 additional jobs 6 over the current plan period. This scale of uplift is only possible because of the planned approach taken on these sites, which is essential to contribute to the transport and other supporting infrastructure necessary to accommodate additional housing. Any policy that undermines the proportionate management of London s industrial land supply will threaten the continuing strategic release of land for housing development. Therefore there is no evidence that the proposed permitted development right will lead to an increase in the delivery of housing units. Implications of loss of warehousing on logistics The implications of the development right for B8 is particularly serious for London s essential logistics sector, which underpins nearly all other economic activities in the 4 URS/DTZ. London Industrial Land Baseline, 2010 p18 5 Mayor of London. Land for Industry and Transport SPG. GLA 2012, p8 6 Mayor of London. Further Alterations to the London Plan. The Spatial Development Strategy for Greater London. GLA, p60 11

12 Capital and is expected to grow an additional 1.5% per annum in employment terms up to London s logistics sector grew by 41 per cent between 1996 and , reflecting an increasing shift towards modern forms of retail and business services and this show little sign of diminishing even in the current economic climate. Research for the GLA forecasts additional demand for over 329 ha of land for warehousing and logistics between 2011 and The London logistics sector s annual output, measured by gross value added (GVA), is 8 billion, or 3.4 per cent of London s output (see Figure 1.1). Combining this figure with the output of those workers performing logistics functions in other industries gives 8.8 billion 10. There are approximately 221,000 full-time equivalent employees working in the London logistics sector. That is 5.2 per cent of all London s employees. Making it a more important contributor to employment than public administration. 11 The loss of reasonable control of B8 uses therefore represents a significant threat to jobs as well as to the necessary urban and economic functions that logistics businesses support. Conclusions The proposed unmanaged approach to industrial land is one wholly inappropriate to the economy and land market of London. There are substantial direct and indirect risks to London s economy and employment prospects and very little prospect of compensatory employment and economic benefits deriving from the proposed development right. It may undermine the planned release of surplus industrial land and its efficient reuse in the form of Opportunity Areas, and offers no benefit over this planned approach. Question 2.2: Should the new permitted development right: (i) (ii) include a limit on the amount of floor space that can change use to residential apply in Article 1(5) land i.e. land within a National Park, the Broads, an Area of Outstanding Natural Beauty, an area designated as a conservation area, and land within World Heritage Sites and 7 GLA economics, 2011) Working Paper 51:Employment projections for London by sector and trend-based projections by borough 8 GLA Economics. Working Paper 37: London s logistics sector Roger Tyme & Partners. Industrial Land Demand and Release Benchmarks in London Mayor of London. Land for Industry and Transport SPG. GLA GLA Economics. Working Paper 37: London s logistics sector Ibid. 12

13 (iii) should other issues be considered as part of the prior approval, for example the impact of the proposed residential use on neighbouring employment uses? (i) limit on floor space (ii) apply in Article 1(5) land (iii) other prior approval issues i) Given the necessity of planning for London s employment and warehousing needs, the permitted development right should be limited to buildings where the cumulative floor space of the building or buildings which are to change use, does not exceed 150 m 2. To allow development rights for larger premises will considerably accelerate the loss of B8 uses in particular, and will encourage frivolous applications for premises that are unsuited to conversion and will require further applications in order to achieve habitable housing. ii) iii) It is essential that impact on neighbouring industrial uses is a prior approvals criterion to mitigate the serious impact that this development would have on the strategic supply of industrial land in London. Two suggested specific prior approvals criteria for this permitted development right to are: Development is not permitted where the site forms part of land designated as industrial land in the Development Plan. And Development under this right must not constrain or undermine the operations of neighbouring employment uses. Applications for prior approval must demonstrate that they are not vulnerable to noise or emissions generated by neighbouring industrial uses including their vehicle servicing. Question 2.3: Do you agree that there should be permitted development rights, as proposed, for laundrettes, amusement arcades/centres, casinos and nightclubs to change use to residential (C3) use and to carry out building work directly related to the change of use? 13

14 The London Plan and Local Plans already promote the proactively managed change of use of these uses and the appropriate introduction of residential units into town centres. A key concern is the impact of this type of piecemeal, incremental change and how it cuts across a more comprehensive approach to redevelopment and constrains the potential for higher density mixed use housing redevelopment opportunities. This is particularly important in London, where town centres have the potential to significantly increase housing supply. The unmanaged introduction of residential units into key shopping areas, where these uses are mainly located, will also damage the retail and service function of those areas by breaking up active frontages and damage the vitality and viability of those retailers left by isolating them from other retailers. These conversions may also harm the amenity of the new residents. t only will the new residential units be potentially in the wrong place due the types of locations amusement arcades, casinos, nightclubs etc are normally found but these conversions are also likely to result in poor standards of accommodation e.g. small unit sizes as they will not need to meet the Mayor s housing standards. Residential amenity may also be harmed by potential conflicts not being managed properly with neighbouring town centre uses such as noise, delivery and services arrangement of neighbouring uses etc. In addition, the ability of councils to delivery on other policy requirements such as affordable housing would be severely limited; with affordable housing being a particularly acute issue in London considering the significant differential between average income and average house prices. There would also be a loss of financial contributions towards essential infrastructure as these changes will not be liable for S106 contributions; again a significant issue in London. Laundrettes are a vital community facility It is considered that laundrettes, in particular, should not be included in any of the proposed permitted development changes. Laundrettes are vital community facility that provides an important service, especially to people on low incomes and those living in temporary accommodation, and they form a key part of lifetime neighbourhoods (see Further Alteration to the London Plan Policy 7.1). In London high density older housing often does not provide the necessary space for washing machines and drying clothes, Laundrettes are an essential local service for people living in such accommodation. Allowing the conversion of laundrettes to residential use will reduce their availability and thus the ability of people to live in dense urban areas. Paragraph 70 of the NPPF requires positive planning for the provision of community facilities, and guard against their loss; To deliver the social, recreational and cultural facilities and services the community needs, planning policies and decisions should: plan positively for the provision and use of shared space, community facilities (such as local shops, meeting places, sports venues, cultural 14

15 buildings, public houses and places of worship) and other local services to enhance the sustainability of communities and residential environments; guard against the unnecessary loss of valued facilities and services, particularly where this would reduce the community s ability to meet its day-to-day needs; ensure that established shops, facilities and services are able to develop and modernise in a way that is sustainable, The proposed permitted development right would make it impossible for local authorities to follow the requirements of the NPPF and plan positively for laundrettes and guard against their loss. Question 2.4: Should the new permitted development right include: (i) a limit on the amount of floor space that can change use to residential and (ii) a prior approval in respect of design and external appearance? i) Limiting the amount of floorspace that can change use will enable the transfer of larger units to residential to be managed, therefore the permitted development right should be limited to buildings where the cumulative floorspace of the building or buildings which are to change use, does not exceed 150 m 2. The conversion of larger night clubs and casinos units will have the most significant impact on local infrastructure and are likely to result in the poorest quality housing. It is therefore important to ensure these conversions are part of a proactively managed approach and are subject to the necessary planning requirements to ensure residential amenity, quality housing and appropriate contributions to social infrastructure requirements. However, as laundrettes are generally small in scale, they are likely to be under any proposed size threshold and due to their important social function should not be included in any of the proposed permitted development changes. ii) The design and external appeared of the converted premises will be key to integrating it into the surrounding area. It will also help to ensure residential amenity in providing better quality homes in terms of space standards and design. 15

16 Question 2.5: Do you agree that there should be a permitted development right from May 2016 to allow change of use from offices (B1(a)) to residential (C3)? Detailed reasoning for the Mayor s concerns to this proposal is given below. In summary the Mayor objects to the proposal and particularly the removal of the exemption from this permitted development right for the Central Activities Zone (CAZ), the north of the Isle of Dogs (IoD), Tech City (TeC), and the Royal Docks Enterprise Zone (EZ) for the following reasons: The proposal is premature and lacks an evidence-based assessment of existing policy. The planning system in London delivers a higher quantity and quality of housing from surplus office stock than can be achieved through the permitted development right. Under the current permitted development rights in London: Occupied as well as surplus offices are being converted to residential use, 62% of current permitted development approvals in London are for occupied or part occupied offices. 373,700 m 2 of occupied office floorspace has gained prior approval. 33,070 employees will have to be relocated or lose their job because their workplace will be converted into residential use. The housing units gained are very small, offer poor residential amenity, and expensive. The large differential in office and residential values will result in a significant loss of London s office stock and reduce future supply. London s competitive international office offer will be compromised Employment growth will be reduced due to lack of office space Office rents will rise leading to business costs increasing Smaller affordable office floorspace will be favoured for conversion thus threatening key growing sectors of London s economy (technology, media, communications and services) Current lack of supply of office floorspace in central London will be exacerbated Diluting London s strategically important office areas with housing will weaken their agglomeration benefits and thus damage the economy of London, the wider South East and the UK. Premature and no evidences base for policy The proposal is premature and lacks the evidence based assessment of the policy as promised by the Secretary of State for Communities and Local Government in his written statement to Parliament 24 January 2013 on permitted development rights for change of land use, in which he said: 16

17 In line with best practice on public policy, there will be a sunset clause, limiting the changes to 3 years and a review of the benefits from the policy at that point. This will provide Parliament with the opportunity to extend the policy indefinitely should it wish 12. The current temporary permitted development right for offices (B1(a)) to residential (C3) has been operating for a little over one year and there is no evidence that the policy is increasing the speed or quantity of housing supply more than the existing planning system. A full assessment should be made before extending the permitted development right. A national assessment of the policy will need to determine the number, quality, and cost of the new housing units created from the policy and the amount of vacant and occupied floorspace that has been converted to residential, and the economic outcomes of the loss of office space and creation of new housing. Removal of exemptions The consultation proposal will remove the current exemption from this permitted development right for the Central Activities Zone (CAZ), the north of the Isle of Dogs (IoD), Tech City (TeC), and the Royal Docks Enterprise Zone (EZ). These areas were considered suitable for exemption only last year, and since then the case for their exemption has only become stronger as detailed below. A strong justification remains for exempting these areas as set out in the Mayor s exemption request of February Loss of occupied office floorspace and jobs under current policy The GLA has been monitoring Class J prior approvals since commencement of the Town and Country Planning (General Permitted Development) (Amendment) (England) Order 2013 on 30 May Data on 1,581 prior approvals applications has been submitted from London boroughs and of these 1,064 were approved. The data collected clearly shows that it is not simply surplus office space that is being encouraged to change to residential use but occupied offices. 62% of the approved prior approvals were for fully occupied or part occupied offices (520 prior approvals for which there was information show 223 as fully occupied and a further 101 as part vacant, and 196 were fully vacant). The approval for residential use of occupied offices leads to businesses being forced to find alterative accommodation, sometimes at short notice, threatening their survival and the jobs they have created. From the prior approval data collected on office floorspace and occupancy it is estimated that 373,700 m 2 of occupied office floorspace is now permitted to become residential units 13. The loss of occupied office floorspace means that 33, Source: 13 Each Class J prior approval is resulting in an average loss of 669 m 2 of office floorspace. 1,064 Class J prior approvals with consent = 711,816 m 2 of office floorspace. 43% of approvals are fully occupied = 306,080 m 2 of occupied office floorspace. In addition 19% of approvals are part vacant, assuming a 50% occupancy rate these = 67,622 m 2. 17

18 employees 14 may have to be relocated or lose their job because their workplace will be converted into residential units. Managed release of surplus office is working in London The London Plan supports the managed change of use of offices to residential. London Plan and local borough plans provide an effective way of converting surplus business capacity to other uses including residential. Spatial planning encourages the changes of use of proven surplus capacity and, conversely, consolidates the strengths of viable business locations. Through the London Strategic Housing Land Availability Assessment (SHLAA) 2013 a rigorous assessment of London s housing capacity has been undertaken. This assessment has resulted in significant increases in housing targets in the Further Alterations to the London Plan (FALP) 2014, and clearly demonstrates how the planning system can efficiently manage land uses. The managed release of surplus office floorspace for comprehensive redevelopments delivers more housing and commercial floorspace than can be achieved through piecemeal change of use. GLA monitoring indicates that for residential floorspace created through change of use of sites, 94 m 2 of office floorspace on average is lost per residential unit created, compared to a loss of only 30 m 2 of office floorspace per residential unit created in comprehensive redevelopments. 15 Across London as a whole, local implementation of strategic policy to carefully manage the release of surplus office capacity led to the completion of 11,400 homes from this source , with work started on a further 13,200 homes 16. Within the nationally important London office locations currently exempt from the B(a) to C3 permitted development right, 1,602,644 m 2 of B1(a) floorspace has been granted permission for change of use or redevelopment to create 17,006 residential units between (see Table 1). 14 Using employment density figures for London from the British Council for Offices (BCO) 2013 of one worker per 11.3 sq m GIA. 15 Ramidus Consulting et al. London Office Policy Review GLA, 2012, section Ramidus, 2012 op cit Figure

19 Table 1: B1(a) floorspace approved for C3 development in exempt areas* Year B1a floorspace lost (m 2) C3 residential units gained 2004/05-77,393 1, /06-96,459 1, /07-151,825 1, /08-82,947 1, /09-127,911 1, /10-71,797 1, /11-166,544 1, /12-294,628 2, /13-147,098 1, /14-386,042 3,239 Total -1,602,644 17,006 *CAZ, IoD, TeC, EZ and RB Kensington and Chelsea (Source: London Development Database) Differential in office and residential values The difference between office and residential values in the current exempt areas are such that a change to permitted development rights would be likely to see largescale loss of office stock and an irreversible change in the nature of the country s commercial core. The fundamental dynamic underlying the Mayor s concerns over the potential impact of government s proposals is the relationship between the value of land in housing and office use, even within these nationally important office locations. While they are attractive as places to do business, they are also very attractive places to live, particularly for high earning individuals. In part, of course, this is because of the proximity to the places where these individuals work, and there is an extent to which large-scale loss of offices to residential will become counter-productive. Striking the right balance, and avoiding the kind of market failure that leads to large-scale negative effects because of the cumulative effects of a number of uncontrolled individual conversions, is one of the main justifications for planning one that is vital in areas like those dealt with here. The evidence submitted by the Mayor last year requesting exemption for London s nationally important office locations clearly demonstrates the risk caused by the residential and office price differential. Jones Lang LaSalle 17 has reported that in the City of London in the six years to 2011 maximum office prices were likely to exceed prime residential prices (most residential development there is prime ) only in some years, and that in current economic conditions residential prices are likely to be stronger than offices. Looking at the office stock as a whole, average office prices at the peak of the office market were only 75% of those for residential. For the most part they were little more than 50% and by 2011 had dropped to 41%. 17 Jones Lang LaSalle (JLL). Potential Impact of Use Class Order Relaxation for Changing Use from Offices to Housing on City Office Stock. JLL,

20 JLL recent office market report for second quarter of shows that offices rents in the City are still no higher than the average during the last cycle (c 60 sq ft). In the West End residential market, the differential against the office average is even greater (even though the office price is significantly higher than in the City rents in the prime West End market of Mayfair are now 105 sq ft. Average office rents are much lower elsewhere in the nationally important office locations eg, sq ft in the Isle of Dogs, sq ft in mid town, 40 sq ft in parts of the South Bank and in much of Tech City significantly less than 35 sq ft, but, when converted to prices, similar or greater differentials between offices and residential as recorded in the City are likely to remain because of the attractiveness of these areas for housing. Over the past year residential price growth in the City was 18.3% and east of the City was 17.3% 19 In addition, JLL expects yields on central London apartments to exceed those on offices, and as funding for housing is much easier to obtain than for offices (not least because of pre-sales), developers continue to find housing a more attractive business proposition than offices. Pricing signals is too simple a mechanism in London A purely housing market led approach will tend to cherry pick business sites that are most attractive for residential use. As well as leading to the direct loss of employment on affected sites this will also have a wider impact on surrounding businesses, compromising their effectiveness in either industrial or office use and because of the different life-spans of commercial and residential property, potentially constraining redevelopment. Employment growth threatened by reduced office floorspace Research on the London labour market by GLA Economics 20 shows that jobs in London are projected to grow by more than 860,000 by Detailed projections of employment growth are provided across the range of economic sectors at the London-level alongside a borough breakdown of total employment 21 taking into account an assessment of the capacity of London s employment sites 22 and accessibility considerations. 23 GLA Economics published a further report to compare the performance of their projections since 2002 against those of other respected organisations. 24 Recent evidence indicates that London s employment has risen from a low point of 4.8 million in the last quarter of 2009 to 5.5 million in the first quarter of More recent independent projections (Cambridge Econometrics, 18 Jones Lang LaSalle. The Central London Office Market Q Jones Lang LaSalle (JLL). Understanding Digial London: Shoreditch, Clerkenwell, Aldgate, Mayor of London/London Enterprise Panel. London s Labour Market Projections. GLA, GLA Economics. London employment projections. GLA London Datastore Peter Brett Associates/Roger Tym. London Employment Sites Database. Final Report. GLA, SKM Colin Buchanan. Accessibility employment projections for London. GLA, GLA Economics. Performance of GLA Economics Employment Projections. GLA, Source: ONS Workforce Jobs, 2014 Quarter 1 20

21 2013; Oxford Economic Forecasting, 2014; Experian Economics, 2014; and UK Commission for Employment and Skills, 2014) 26 suggest even higher levels of near term employment and employment growth. The significant growth in employment projected for London will increase demand for office floorspace. The government proposal risks decreasing the supply of new and availability of older office stock at the same time demand will be rising, thus resulting in increased rent costs for businesses. The increased costs and lack of office floorspace will limit economic growth and job creation. Employment in strategically important office areas at risk In 2011 a third of London s jobs were in CAZ and TeC, with at least a further 60,000-90,000 in the north of the Isle of Dogs. Of these 57% 27 were in office based sectors. Recent projections 28 suggest that in CAZ alone office employment could grow by over 310,000 jobs between 2011 and 2036, a rate of increase higher than anticipated in the current London Plan. Accommodating this growth is a central concern of the London Plan and Local Plans the present proposals could compromise the careful balance they seek to strike between fostering growth, supporting change and managing the mix of uses across the central London office market areas for the benefit of both residents and workers. Every day, around 246,000 people travel from outside London for jobs in the central area; a substantial number of these will be in office-based employment in the exempt areas. A further 775,000 travel in from other parts of London. Loss of employment opportunities in these areas will have direct effects on those individuals concerned; it will also have effects on the places from which they travel in London and beyond with the loss of spending power, and consequent effects on local employment. Residential conversion constraining supply of office floorspace in strategically important office areas According to the London Office Policy Review 29 there were over 1,200 office to residential conversion/redevelopment sites in the CAZ boroughs 30 over the period Together these sites represented a potential loss of over 1 million sqm of B1 floorspace (about 5% of the CAZ boroughs total office stock) of which over 300,000 sqm had been completed. The scale of conversions is highest in Westminster, which accounts for around 35% of the B1 floorspace losses in the CAZ boroughs. 26 Summary of Employment Projections, London. GLA London Datastore Mayor s Outer London Commission. First Report. GLA, 2010 Roger Tym & Partners. London Employment Time Series. GLA, Source: Peter Brett Associaltes. London Office Floorspace Projections, July 2014/GLA analysis. 29 Ramidus Consulting et al London Office Policy Review. GLA, based on completions and approvals data from the London Development Database, minimum threshold 1,000 sqm. 30 Camden, City of London, Hackney, Islington, Lambeth, Kensington & Chelsea, Southwark, Tower Hamlets, Wandsworth and Westminster 21

22 The conversion to residential in the, currently exempt, strategically important offices areas, is leading to the low vacancies rates outline below. The proposal to extend the permitted development right to these areas will exacerbate this situation. The CAZ is a high-density area where development is complex and requires careful site assembly. Unplanned changes of use of buildings will restrict redevelopment opportunities and act as a barrier to development. Low vacancy rates in strategically important office areas The London Plan uses an 8% vacancy rate to test whether the market is tightening or loosening. Collier s report 31 on the central London office market for quarter 2 in 2014 warned that delivery of office accommodation now fails to keep up with demand in the West End market and vacancy rates here were 3.8% or 2.8% according to JLL 32, the lowest since 2001 and significantly lower than the long term average of 5.0%. Grade A vacancy in the West End is 2.1%, a decrease from 2.7% in Q and lower than the long term average of 2.9%. In the City, although vacancy rose to 7.3% in Q2 due to a spike in development completions, the JLL 33 report highlighted that the pipeline of committed development is very limited beyond 2014 and they anticipate a tightening of supply over coming quarters. The lack of supply of office floorspace is now also reported 34 as an issue in the majority of submarkets that are currently exempted form the permitted development right: Holborn, Euston, Fizrovia, Soho, Belgravia and the wider Docklands all experiencing vacancy rates below 3%. Conversion of offices constrains office development pipeline To be viable, much of the office development in London s strategic office locations takes place on comparatively low value land i.e. that which is already in office use. Particularly in areas where offices are tightly clustered this also provides flexibility for site assembly. Both viability and flexibility would be undermined if uncontrolled residential i.e. higher value, development was permitted in these areas. Strategically, this would compromise London s ability to provide a modern, competitive international office offer. In its 2011 work for the City Corporation on the City itself and the City Fringe, JLL recognised that the whole pipeline was unlikely to be at risk to conversion. JLL suggested that schemes which entailed demolition, were under construction or involved large floorplates which are unsuitable for residential conversion should be excluded from the calculation. Taking these factors into account, it was considered 31 Colliers International, Research & Forecast Report, Quarter , Central London. 32 Jones Lang LaSalle. The Central London Office Market Q Ibid 34 Colliers International, Research & Forecast Report, Quarter , Central London. 22

23 that approximately 69% of the pipeline would have had potential to be lost to residential conversion. Even if this percentage was reduced by, say, half (to 34.5%), the impact would still be very substantial. Applied to the pipeline within London s nationally important office locations, government s proposal might constrain renewal/extension of the stock there by some million sq m: a significant part of the million sq m projected new floorspace requirement in CAZ and IoD The potential loss of this space from the pipeline could accommodate 240,000 to 272,000 new office workers at 11.3 sq m per worker. Even at the lower end of this range these are substantial figures relative to the London Plan projected increase in office based employment in CAZ and IoD of 177,000, much less relative to endogenous demand for modern new space. Loss of smaller affordable office stock Within the Central Activities Zone (CAZ) differentials in office and residential values 36 has led to concern over the loss of office space to housing even though the area is exempt from the government s liberalisation of permitted development rights. Although the office development pipeline is sufficient to support demand for new provision, strategic monitoring 37 suggests that there is a tightening of supply relative to demand in central London. There is concern that removal of the permitted development exemption will intensify the loss of generally more affordable existing office stock and erode the strategic offer of the CAZ as a competitive, internationally important office location 38. This is likely to impact initially on the agglomeration benefits (discussed below) provided by these locations and then on the range and scale of choice within their mainstream offer. The result will be loss of commercial competitive advantage, which cannot be offset by a possible short term increment to housing provision. There is further concern over the loss of smaller scale offices as they are usually a crucial element of vibrant mixed-use localities, which make London a globally attractive place to work and live. Research commissioned by the City of London indicates that a vital ingredient of the City s ability to adapt to change has been the pool of smaller, less highly specified and lower cost buildings available to smaller occupiers 39. More than half of the City s occupiers (52%) are in units of less than 5,000 sq ft (465 sqm), with strong 35 Mayor of London. The London Plan. The Spatial Development Strategy for Greater London. GLA, 2011 Table Jones Lang LaSalle. Permitted Development Rights for Change of Use from Commercial to Residential. February Mayor of London. London Plan Annual Monitoring Report GLA, March 2014 Key Performance Indicator 8, page Mayor of London. Permitted development rights for change of use from commercial to residential. Request for exemption for London s nationally important office locations. February Ramidus Consulting Ltd. Taking stock: The relationship between businesses and office provision in the City. March

24 representation in growing sectors such as technology, media, communications and services 40. The research points to the need to ensure a supply of offices suitable for smaller occupiers noting that smaller occupiers often take units in larger buildings as well as small office units. Westminster has a significant small office market particularly in areas such as Mayfair and St James s, and significant amounts of flexible office space, alongside the larger office floor plates found in areas such as Paddington and Victoria. Loss of small offices has been highlighted as an issue in research 41. Evidence from recorded planning completions and approvals suggests that about 70% 42 of the offices in Westminster that have been converted to residential had a floorspace of less than 500sqm. Monitoring data from Camden suggests that 69% of offices with floorspace losses in CAZ (completions and pipeline) had an original office floorspace of less than 500 sqm 43. Data from Islington suggests that 80% of completions with office floorspace losses in CAZ had an original office floorspace of less than 500 sqm 44. Contributions to the UK economy of the strategically important office areas London s residents alone generate a fifth of national GVA and when the net contribution of those who commute from beyond London is taken into account the proportion rises to 22%. Directly and indirectly office based activities are the key driver of this activity, not least because they are the source of most of the tradeable wealth London produces, whether this is traded with the rest of the country or overseas. The higher value added office functions are concentrated in the nationally important office locations in and around central London, contributing to an agglomeration of activities which account for 44% of London s GVA, or, on a prudent GLA estimate, 9% of that of the UK (and 9% of the nation s tax revenues). Other estimates suggest these contributions may be higher. At the macro level, the nationally important central London office locations must be seen as an integral part not just of the London economy but of that of the wider south east which in 2011 contributed 590 mll to national GVA, 45% of the total, and of which nearly half was produced in London alone. Central London office based activities are at the centre of the complex web of linkages which make up this vast regional economy. Ensuring that they have an adequate and competitive range of accommodation to grow and change is essential to securing London s net contribution to the national exchequer, estimated by some to be more than 20 billion pa in non-recessionary times Ramidus 2013 op cit Figure 3.2 and 3.8a 41 City of Westminster. Economic Report. Local Economic Assessment Baseline Study, August Source: Westminster City Council. B1a to C3 completions April 2008 March 2014 and approvals under construction/not started as at March Source: Camden Council monitoring data ( ) 44 Source: Islington Council monitoring data ( ) 45 London School of Economics. London s Contribution to the UK Economy. City of London Corporation