A need for proactive policies at borough level

Savills analysis points towards the need for a more ambitious New London Plan (NLP). Once again our work confirms a strong and ongoing need for floorspace to enable companies to extend and refine their supply chain logistics, address the market’s historic suppressed demand and add additional capacity to account for housing growth which is intended to add 88,000 new homes per year. Going for growth is the national government’s ongoing imperative and the NLP needs to be better aligned with it.

This latest document notes, yet again, the dramatic decline of London’s industrial land – down 18% since 2001 – and the implications for residents and businesses. But Savills recognises the administrative limits of a plan whose primary role is to frame local authority plan-making and not to identify new development sites. That is the remit of the boroughs. The NLP needs more proactive policies that require local authorities to allocate more industrial land in a deliberate and coordinated fashion, with specific floorspace targets on a borough-by-borough basis.

In the next version of the emerging London Plan, Savills urges the Mayor to consider these four recommendations:

1. Require London boroughs to coordinate delivery of industrial land with neighbouring authorities, including – and most emphatically with – those outside of London with a strong geographical connection with the capital;
2. Provide policies that identify evidence-based floorspace targets for local authorities that take account of both London’s chronic supply shortfall and the demand arising from future population growth;
3. Encourage the relevant local authorities to adopt planning policies that enable development of suitable unallocated sites for industrial and logistics (I&L), including those in the Green Belt; and
4. The Plan needs to take the opportunity to ensure that the needs of the data centre sector are properly incorporated.

London boroughs must look beyond their borders to meet needs

The NLP hints at creating a London-wide industrial land strategy as well as bringing back local authority industrial land targets. But it is also open to adjusting the traditional borough-by-borough approach to delivery by concentrating on the locations best suited for new I&L premises. 

Whilst a more considered spatial strategy for industrial land reveals an understanding of industrial markets’ spatial dynamics, the NLP needs to have policy hooks that require local authorities to coordinate delivery with their counterparts. This is done for housing, and industrial land should be treated in the same way. 

In addition to requiring local authorities to work together within London, they should also be required to do so with relevant local authorities beyond the London border. Afterall, London’s supply chain linkages extend well into its hinterland and occupiers often consider the convenience of a London location against the lower cost of operating in Hemel Hempstead, for example. The National Planning Policy Guidance (NPPG) advocates for sub-regional analysis that is typically within a functional economic market area (FEMA). However, local authorities often sidestep meaningful engagement with their neighbouring authorities by focusing solely on need generated within their borough and estimation methods that avoid having to deliver new employment sites. London boroughs must look beyond their borders if London is to meaningfully look into how its needs can be met.

Identify evidence-based floorspace targets

To ensure local authorities’ plans get to grips with their actual underlying need, the NLP should provide accurate, market-facing estimation methods for local authorities’ floorspace methods. Given the rather weak guidelines in the NPPG, many local authorities tend to use estimation methods that lack ambition. The use of historic delivery as a means of projecting future need is wrong because markets which failed to deliver floorspace in the past are not a sound basis for forecasting future need. Savills has long advocated for better market-facing estimation methods that account for suppressed demand. But the calculations also need to account for London’s population growth. Savills research shows that nearly 50% of new demand for I&L floorspace arises from the increase in households, with the other half for growth related to business-to-business activity and the refinement of supply chain logistics. The target of 880,000 new households in London needs to be recognised as a generator of considerable demand over the new plan period.

Planning policies geared towards enabling development

Borough plans and their strategic and development management policies need to be oriented towards identifying suitable sites and/or granting permission for I&L planning applications in the Green Belt, under the right circumstances. 

This latest document states that areas in the Green Belt with high noise levels or which are connected to the strategic road network could be used to decant existing industrial occupiers on sites that could be used for housing. Whilst this is unlikely to increase the net quantum of London’s I&L land, the consideration of new, well-located sites is welcomed. But permissions on such sites should be secured even if they are not substituting for lost industrial land in more central locations. They are needed to address the historic undersupply as well as today’s ongoing demand.

Data centres

The NLP rightly recognises the increasing importance, and the challenges of, the data centre sector. It hints at the possibility of a location-based policy which seeks – in the NLP’s words – to prevent data centres from ‘crowding out’ industrial and residential uses. 

Data centres can be located in places which are away from established urban centres or the strategic transport network, but it needs to be recognised that – with the exception of very large AI and machine learning data centres – most can only locate within existing established Availability Zones (AZs), where the fibre network allows connection to other data centres and to the populations that are being served. Power availability at scale is another critical constraint. Any location-based approach needs to be fully cognisant of these important matters.

Conclusion

New industrial land, whether inside or outside of Greater London, is delivering a diversity of jobs needed for the economy to thrive. The NLP needs to make a forceful case for the I&L sector and the associated essential economic activities. This is where much of today’s economic growth and innovation takes place. The NLP needs to more forthrightly recognise it.

Further information

Contact Mark Powney or Nick Green