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1 Item No. Classification: Open Date: 13 March 2013 Decision Taker: Cabinet Member for Regeneration and Corporate Strategy Report title: Wards affected: From: Application to apply for exemptions from the forthcoming amendments to the General Permitted Development Order (GPDO) 1995 to allow the permitted development right for change of use from commercial to residential All Chief Executive RECOMMENDATIONS That the cabinet member for regeneration and corporate strategy: 1. Agrees the submission of the formal request (Appendix A) to the Department of Communities and Local Government (DCLG) to consider area exemptions from the forthcoming amendment to the Town and Country Planning (General Permitted Development) Order 1995 (as amended) to grant permitted development rights to allow change of use for a building used for office (B1a) to residential (as set out in the DCLG letter of 24 January 2012 (Appendix B)). 2. Notes that the draft request (Appendix A) was submitted to DCLG on 22 February BACKGROUND INFORMATION 3. The government has announced that it is making amendments to the Town and Country (General Permitted Development) (GPDO) Order 1995 to allow permitted development rights for change of use from B1(a) office to C3 residential. The new rights will initially be time-limited for a period of three years. Towards the end of this period, the government will consider whether they should be extended indefinitely. 4. This permitted development will be subject to a prior approval process covering the following matters: Significant transport and highway impacts Development in areas of high flood risk, land contamination and safety hazard zones. 5. Where a proposed change cannot satisfy these requirements a planning application will be required. 6. The permitted development rights will only cover change of use: any associated physical development which currently requires a planning application will continue to need one. 7. On 24 January 2013 the DCLG wrote to authorities giving them a window in which they could seek an exemption from this change for specific parts of their 1

2 locality. Exemptions will only be granted in exceptional circumstances, where local authorities demonstrate clearly that the introduction of these new permitted development rights in a particular area will lead to: The loss of a nationally significant area of economic activity (category A applications); or Substantial adverse economic consequences at the local authority level which are not offset by the positive benefits the new rights would bring (category B applications). 8. Exemption requests to the government needed to be made by 5pm on Friday 22 February The DCLG confirmed that no requests will be accepted after the deadline. Because of the short timeframe which authorities were given to respond and in view of the urgency of the deadline, there was not time to formally authorise the exemption request through the Individual Decision Maker (IDM) process. Therefore the draft request was sent on 22 February. The government will confirm which areas will be exempt in spring 2013, with the permitted development rights coming into force in July KEY ISSUES FOR CONSIDERATION Criteria for exemption 9. The government has outlined that local authorities must provide a detailed description of the adverse impact they anticipate and demonstrate clearly both how the introduction of these permitted development rights will lead to that impact, and why the particular area should be exempted. A clear explanation must be given of how any additional evidence supports this case. 10. For category A applications, requests will be assessed by considering: The scale of the adverse impact in absolute terms The significance of the adverse impact at a national level The degree to which there is likely to be a strategic and long-term adverse economic impact Whether the proposed area of exemption is the smallest area necessary to address the potential adverse economic impact. 11. For category B applications, requests will be assessed by considering: The scale of the impact in absolute terms The significance of the adverse impact at the level of the local authority or wider The degree to which there is likely to be a strategic and long-term adverse economic impact Whether the proposed area of exemption is the smallest area necessary to address the potential adverse economic impact. Areas in Southwark requested for exemption 12. The Mayor of London submitted an application for exemption under category (A) for the whole of the central activities zone (CAZ), the north of Isle of Dogs and Tech City. It should be noted that the London Plan CAZ boundary varies slightly 2

3 from that shown on Southwark s adopted policies map 2012 by including an area of Shad Thames (west of Mill Street) within the CAZ. 13. At the local authority level, Southwark has submitted exemption applications for: The CAZ under category A The CAZ under category B (locations for which authorities are requesting both a category A and category B exemption should be submitted separately under each category) Canada Water action area core (category B) Peckham action area core (category B) Camberwell action area (category B) Elephant and Castle town centre (area outside the CAZ) (category B) Old Kent Road strategic preferred industrial location (category B) Mandela Way local preferred industrial location (category B) Parkhouse Street local preferred industrial location (category B). 14. In view of the urgency of the DCLG s deadline, the draft applications were submitted on 22 February. There will not be an opportunity to make any further amendments to the applications. Category A application: the CAZ The scale of the adverse impact in absolute terms 15. The CAZ in Southwark includes Elephant and Castle, Bankside, Borough, London Bridge and parts of Shad Thames and Bermondsey. The SE1 area is recognised by commercial agents and in the GLA s London Office Policy Review as an established part of the central London office market. Southwark s 2010 Employment Land Review (ELR) estimated that the Southwark SE1 area contains some 1.13m sqm of office space. Of this space around 36% comprises modern large floorplate space which would not be suitable for conversion to residential development. However, the remaining space would be at risk of conversion. 16. Maximum residential values significantly outstrip maximum office values which creates an incentive to convert second hand and obsolescent office stock into residential accommodation, rather than redevelop as office space. The significance of the adverse impact at a national level 17. The Mayor s economic development strategy 2010 indicates that around 31% of London s jobs are provided by office based activities including business, real estate and finance. The majority of office floorspace in London is provided in the CAZ, Tech City and Docklands. Of the 11 boroughs in which these areas are located, Southwark has the sixth highest amount of office space. Vacancy in the SE1 area is low (6.3% in Q3 2012). 18. An extensive loss of office floorspace would have a significant impact on London s ability to provide for sufficient office floorspace to meet need. It would also serve to fragment the clustering of businesses which is a key strength of central London and a vital part of its success. At national level London generates 21% of the UK s total GVA, 23% of the UK s corporation tax and 22.4% of 3

4 business rates. London s contribution to the UK economy would be damaged if the capital is unable to provide enough office space to meet needs. The degree to which there is likely to be a strategic and long-term adverse economic impact 19. The amount of office stock in Southwark grew by over 20% between 2000 and 2012, the fourth highest rate of growth in London. In the period between 2011 and 2036 it is estimated that additional gross demand for office floorspace in Southwark will be approximately 345,259sqm which represents 9.5% of estimated gross demand in the CAZ/Tech City/Isle of Dogs boroughs. Failure to exempt the Southwark CAZ from the forthcoming changes to permitted development rights would impede Southwark s ability to meet its London Plan jobs targets and would undermine its effort to ensure a supply of office space suitable for the SE1 office market. Whether the proposed area of exemption is the smallest area necessary to address the potential adverse economic impact 20. The CAZ is a widely recognised designation which has been established in the London Plan and Southwark s policies for some years. The boundaries of the CAZ have been tightly drawn around this concentration of activity and have been examined at successive public examinations. It contains the greatest concentration of office space in Southwark. 21. The borough s application has the support of the two Business Improvement Districts which extend over much of the Southwark CAZ, Better Bankside and Team London Bridge. The BIDs recognise that the benefits of investment in the area go far beyond the BIDs boundaries and that it is essential that the mix of uses continues to support the attraction of the area, and that no single use is allowed to impact on the balance in a way which resulted in an unwanted change to the nature and character of the place. Category B applications: The CAZ, action area cores and town centres The scale of the impact in absolute terms 22. The ELR noted that the local office market in Southwark contains approximately 125,000sqm of office space. It is defined by good access to public transport and other amenities and the availability of good quality flexible workspace. As a result the market is dispersed and focused primarily within the town centres of Canada Water, Elephant & Castle, Camberwell and Peckham, with additional incubator and business clusters located in areas at the fringe of the more regional orientated property market of SE1 in the CAZ. Occupiers are generally SMEs providing services to other local businesses and to a limited degree, larger firms in central London. It is estimated that there are around 9,000 people employed in the local office market and a significant proportion of these are located within the Southwark CAZ. 23. Southwark s town centres contain a significant amount of office space. Included in this is 9,041sqm in the Canada Water core area of which approximately 6,380 sqm could be converted, 12,000 sqm in the Elephant and Castle opportunity area, 37,000 sqm in the Camberwell action area, and 22,000sqm in the Peckham action area core. 4

5 24. The majority of the office floorspace in these locations comprise of space second-hand stock with small floorplates which could be converted into residential accommodation. Maximum residential values significantly outstrip maximum office values in all of the proposed exemption areas which creates an incentive to convert second hand and obsolescent office stock into residential accommodation, rather than redevelop as office space. The significance of the adverse impact at the level of the local authority or wider 25. The National Planning Policy Framework (NPPF) emphasises the importance of clusters, stating the authorities should Plan positively for the location, promotion and expansion of clusters or networks of knowledge driven, creative or high technology industries. A number of studies have also demonstrated the benefits of clustering and found that agglomeration is a key driver for the growth and success of small businesses. These studies have indicated that reducing the supply of suitable floorspace will result in an increase in rents and will ultimately reduce the concentration of firms which limits the positive benefits of agglomeration. 26. Southwark s Economic Wellbeing Strategy 2012 seeks to use the planning system to help ensure that a supply of better quality, more flexible, better managed and affordable business space is available for start-ups and businesses that are ready to grow. A key theme of the strategy is to foster thriving town centres by harnessing the energy of businesses in order to breathe new life and ideas into town centres. Its key ambitions recognise the benefits of encouraging business networks to flourish and engage with local communities for mutual benefit. The loss of existing business space in these locations could serve to fragment these agglomerations which are critical to Southwark s economy and undermine the council s Economic Wellbeing Strategy. 27. The adverse impact on small businesses in these locations being able to contribute to Southwark s economy would be great. In 2007, there were a total of 11,000 businesses operating in Southwark, 9,000 of which were small businesses (employing below 50 people). This reflects the situation across London as a whole. Between 2000 and 2010 in London the share of the small business base grew by 2% and accounted for 97 per cent of the total business stock. The share of jobs that small firms accounted for also grew by 6% over the same period and in 2010 half of all jobs were in small businesses. The degree to which there is likely to be a strategic and long-term adverse economic impact 28. Southwark s employment targets in the London Plan include 30,000 new jobs in the Bankside, Borough and London bridge opportunity area, 5,000 jobs at Elephant and Castle and 2,000 new jobs at Canada Water. The vision for Peckham and Nunhead set out in the draft AAP includes the provision of around 4,000sqm of business space and 8,000sqm of retail space. At Camberwell, the Core Strategy vision is to focus on protecting and encouraging more small businesses within the town centre and the wide action area. 29. Southwark s ELR forecasts the need to provide between 25,000sqm and 30,000sqm of additional office floorspace over the life of the Core Strategy to meet needs in the local office property market. A failure to exempt these areas would put at risk Southwark s ability to meet its London Plan jobs targets and would undermine its effort to ensure a supply of office space suitable for the local 5

6 market. The number of business start ups in the wards in which these proposed exemption areas are located is demonstrative of the potential for business growth in the borough. 30. Moreover, the potential loss of existing office space in these areas would undermine the council s vision for growth and undermine the council s efforts to deliver regeneration in these areas. Whether the proposed area of exemption is the smallest area necessary to address the potential adverse economic impact 31. The proposed areas to be exempted have established boundaries which have been examined through the Core Strategy and for Canada Water action area core, the AAP. The CAZ, Canada Water and Elephant and Castle areas also respond to the London Plan designations. The boundaries have been drawn tightly around the areas in which growth is expected to occur and reflect the location of development sites and the high public transport accessibility which facilitates regeneration. Category B applications: The preferred industrial locations The scale of the impact in absolute terms 32. There are four preferred industrial locations in Southwark: South East Bermondsey and Old Kent Road which are of strategic importance to London and recognised in the London Plan and Mandela Way and Parkhouse Street which are designated through Southwark s core strategy. The council has undertaken a desktop survey of each of the PILs to estimate how much space there is in each which might be convertible to residential accommodation. There is no office space in the South East Bermondsey PIL and therefore no application is made in respect of that area. 33. There is approximately 84 hectares of B2 and B8 floorspace located in the Strategic and Local Preferred Industrial Locations in Southwark. Southwark has estimated that within the PILs the following amounts of space would be at risk of conversion: Old Kent Road 41,000sqm, Mandela Way 32,000sqm and Parkhouse Street 8,000sqm. A small proportion of this space comprises of existing floorspace in office use. However, the total quantum has been derived from an assessment of the overall potential for conversion of individual buildings in the PIL, looking at the design, floor layout and window orientation. The existing permitted development rights which allow changes of use of up to 500sqm between general industrial use and office use and warehousing and office use could be utilised in this respect. The significance of the adverse impact at the level of the local authority or wider 34. Both Southwark s ELR and the evidence base which underpinned the London Plan indicate that demand for industrial and warehousing land is driven by businesses which serve central London s economy. Such businesses include food and drink preparation for central retail and café outlets, printers and publishers, couriers and express delivery operators, and other providers of time critical services. Demand is also high for properties which are not disturbed by and do not cause disturbance to local residential properties. Industrial uses can create noise, smell, heavy traffic and some are required to operate on a 24-hour basis. Southwark s ELR assessed clusters of business uses across the borough 6

7 and confirmed the suitability of the PILs for industrial and warehousing uses. The introduction of residential uses into the PILs would both jeopardise the council s ability to ensure a supply of land for industrial and warehousing land and fragment the PILs, with the potential to generate conflict between the needs of future residents and the operation of businesses. The degree to which there is likely to be a strategic and long-term adverse economic impact 35. The Mayor s SPG on Land for Industry and Transport (2012) which provides further guidance on release of surplus industrial and warehousing land, advises that Southwark can release 25ha between 2011 and 2031, a rate of 1.3 ha per year. Southwark has assessed the quantitative and qualitative needs for economic activities over the plan period through the ELR. The ELR recommended the release of around 18 ha of industrial and warehousing land for redevelopment over the Core Strategy period ( ) for other uses. When combined the release of warehousing and industrial land which has taken place between 2006 and 2011, the scale of this release is consistent with the London Plan and the Mayor s SPG. The recommendations of the ELR have been taken forward through the Core Strategy. Although the need for land for industry is declining, there remains a significant requirement for industrial and warehousing space in Southwark. Further release of industrial land and potential fragmentation of the PILs would jeopardise ability to meet this need, to the detriment of the London and local economy. Whether the proposed area of exemption is the smallest area necessary to address the potential adverse economic impact 36. The boundaries of the PILs have been drawn tightly around the areas in which industrial uses are protected and promoted. They have been examined through the core strategy and found to be based on robust evidence. Community impact statement 37. A number of parts of the areas covered by Southwark s exemption applications experience high levels of derivation, including employment deprivation. Despite the recession, London s labour market continues to generate a wealth of opportunities both at entry level and for more highly skilled applicants. But meanwhile, the employment rate in Southwark (66.4%) lags behind the rate for London as a whole (68.0%). The council currently aims to maximise jobs and training opportunities which are generated by growth during construction and in the completed developments. 38. The borough s Economic Wellbeing Strategy notes that young people are suffering disproportionately the effects of the recession; year olds are more likely to struggle to find work than older, more experienced workers. It is critical that every young person is job-ready when they leave education or training and enter the labour market. Research demonstrates that widening horizons of young people through experience of work and engagement with employers has a powerful impact on their confidence, motivation and understanding of work and thus their employability. The proposed changes to permitted development rights would significantly constrain the council s ability to engage with developers through the planning process to secure employment and training opportunities in new development. 7

8 39. Southwark has a London Plan housing target of providing 20,050 homes over the period between 2011 and 2021, a rate of 2,005 homes per year (policy 3.3). Paragraph 47 of the national planning policy framework (NPPF) requires authorities to identify and update annually a supply of specific deliverable sites sufficient to provide five years worth of housing. In Southwark s case, this equates to 10,025 homes. Southwark estimates that it has a five year supply of approximately 11,200 homes which would comply with the NPPF requirement. In the light of this, the council considers that there is no overriding need to significantly increase the numbers of homes which are likely to come forward across the borough. Sustainability considerations 40. The change will prevent the use of our adopted planning policies which protect and promote business floorspace. As a consequence, employment growth in the borough may be hindered. The objective of achieving mixed use sustainable communities may be compromised. 41. The changes will remove all planning controls over matters such as dwelling mix, minimum dwelling space standards, amenity space, the provision of wheelchair units etc. In addition, for larger proposals there would be no opportunity to seek CIL to help fund infrastructure, affordable housing or S106 planning obligations to mitigate for the direct impacts of the development. 42. The imposition of the change could have potential impacts on small businesses in the borough, which could impact on a range of equality groups. The accessibility to the local employment market will be restricted and a potential loss of local jobs overall. There are many local services/activities which are only viable at low local rents, especially in the older existing stock, and which provide accessible local jobs. Resource implications 43. There are no resource implications arising directly from this report. SUPPLEMENTARY ADVICE FROM OTHER OFFICERS Director of Legal Services 44. The government is introducing permitted development rights which will allow the change of use from commercial to residential uses. There is a policy statement in the National Planning Policy Framework relating to this. 45. The new development rights allow change of use from B1 (a) offices to C3 residential. However, the department for Communities and Local Government have acknowledged that there may be unique local circumstances which exist and which should be taken into account. The department has therefore allowed local planning authorities the opportunity to seek a local exemption where this can be justified on economic grounds. 46. The purpose of this report is to seek authority for the application for such an exemption. In order to justify this, the council has to demonstrate that the introduction of the new permitted development rights will lead to substantial adverse economic consequences which are not offset by any benefits the new 8

9 rights might bring. This report sets out in detail the perceived adverse consequences. 47. The new permitted development rights will be confirmed after the requests for exemption from various local authorities have been considered. Strategic Director of Finance and Corporate Services (FC/13/004) 48. There are no financial implications directly connected to this report. Any financial implications connected to specific cases arising from the adoption of this policy will be contained in a separate report. APPENDICES No. Appendix A Appendix B Title Applications to apply for exemptions from the amendments to the Town and Country Planning (General Permitted Development) Order (GPDO) 1995 to allow permitted development rights for change of use from commercial to residential Department of Communities and Local Government Chief Planner letter Permitted development rights for change of use from commercial to residential 24 January 2013 AUDIT TRAIL Cabinet Member Councillor Fiona Colley, Cabinet Member for Regeneration and Corporate Strategy Lead Officer Eleanor Kelly, Chief Executive Report Author Barbara-Ann Overwater, Senior Planning Policy Officer Version Final Dated 13 March 2013 Key Decision? No CONSULTATION WITH OTHER OFFICERS / DIRECTORATES / CABINET MEMBER Officer Title Comments sought Comments included Director of Legal Services Yes Yes Strategic Director of Finance and Yes Yes Corporate Services Cabinet Member Yes No Date final report sent to Constitutional Team 13 March

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