How much should the public sector intervene in the development world? It’s a hot topic right now as the general election gets closer, with political parties making promises that could have an impact on many aspects of the property market.
A template for public sector thinking is currently being debated in the capital through the draft New London Plan, first with the mayor of London putting forward proposals and then the secretary of state’s planning inspectorate responding to its recommendations.
What finally emerges – not just for industrial property but all types of real estate – is crucial because it is being keenly watched by local authorities across the UK for clues as to how they should promote or control development in the 2020s.
The good news is that the plan now recognises how important jobs in industrial and warehousing property are to the London economy, with clear guidance that sufficient supply should be provided and maintained, to promote employment and keep businesses moving.
But there are several issues that are more contentious and need to be addressed before the plan is adopted next year.
First is the concept of urban greening, which is a way of helping to offset carbon emissions by adding additional landscaping, living walls and green roof systems to industrial developments.
Our aspiration is to make all our new buildings in London carbon neutral. We’re all for that, and while landscaping, living walls and the promotion of biodiversity are welcome, reinforcing roof structures to accommodate the additional weight of green roofs can increase embedded carbon levels. The methodology to get the right result, rather than the objective itself, is the issue.
Second, in relation to the mayor’s proposal to intensify land use using plot ratios, while the draft plan specified that industrial floorspace should occupy 65% of a site, we agree with the inspectors’ view that this could have an impact on functional efficiency.
Typical single-storey urban warehouses cover 50% of their overall site due to the importance of external circulation and yard space, which is critical to the operational needs of occupiers.
We need to create the right space for businesses to thrive. For example, a cross-dock facility we built for DPD in Newham is 45,000 sq ft with a plot ratio of 25% but supports 100 jobs, which is 60% more than a traditional industrial unit. CBRE has calculated that if a 65% plot ratio was implemented for all schemes, fewer than half of the industrial applications made in London in recent years would have been approved, with the consequent loss of jobs.
The solution to intensification of land use in ultra-urban locations could be multi-level. We have developed a two-storey 700,000 sq ft facility in Paris (pictured), which represents an 80% plot density but retains a footprint with high accessibility and excellent circulation.
One of the most controversial issues is the mayor’s protection of all green-belt land. The inspectors have recommended that as part of a future London-wide Green Belt Review, consideration should be given to identifying locations for industrial development if evidence of need cannot be met in non-green-belt locations.
This is an eminently sensible idea which could put currently designated land, which is actually scrub or brownfield serving no amenity or protective purpose, to better use.
Last is the provision of low-cost and affordable workspace. We have a long experience of providing dedicated space, on flexible terms, for small businesses that are part of the industrial ecosystem of an area.
If there is demand for enterprise space, market forces will naturally provide for it. In the inspectors’ view, ordering boroughs to seek to manipulate rents is neither justified nor consistent with national policy, a point with which we agree. It could backfire and stifle supply.
The draft London Plan is undoubtedly a positive vision for industrial property in the capital and for that the mayor and Greater London Authority must take much credit. However, there are unresolved, important issues – and it’s not just London that’s watching how they play out.
Andy Gulliford is chief operating officer at SEGRO