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Employment Review Final Report
Epping Forest District Council
December 2017
Contents1 Introduction...................................................................................................................................1
2 PolicyandGuidance.......................................................................................................................4
3 WestEssexandEastHertsFutureRequirementsStudy................................................................7
4 CommercialMarketReview.........................................................................................................15
5 SupplyAssessment.......................................................................................................................24
6 FutureSpatialStrategyRecommendations..................................................................................28
Appendix1:Consultees........................................................................................................................31
Appendix2:HeadlineMarketTrends...................................................................................................32
JobNumber: 170105
VersionNumber: Finalv1.0
Approvedby: StuartHardisty
Date: 12thDecember2017
1
1 Introduction
HJAwasappointedbyEppingForestDistrictCouncil(EFDC)toundertakeanEmploymentReviewfortheDistrict.Thisevidenceistobeusedtoinformtheallocationofemploymentsites(specificallyBUseClass)withintheemergingEppingForestDistrictLocalPlan.
ThisEmploymentReviewdrawsonanumberofstudies,inparticular:
• WestEssexandEastHertfordshireAssessmentofEmploymentNeeds1 (hereafterreferredtoas ‘the2017FEMAstudy’)whichprovidesasub-regionaldemandfocusedanalysis;and
• EppingForestDistrictLocalPlanEmploymentLandSupplyAssessment2(hereafterreferredtoas‘theArupsupplyreport’whichprovidesanalysisofDistrictlevelsupplysidematters.
This report provides additional District level commercial market analysis, drawing heavily onevidence gathered from local commercial market stakeholders. This report also seeks to bringtogether the evidence from across the three streams of work. Headline summaries of the 2017FEMAstudyandArupsupplyreportareincluded,however,forfulldetailtheoriginalreportsshouldbereferenced.
1.1 BackgroundandContext
Giventherangeofrelevantdocuments,bothcurrentandhistoric,eachisnotedbelow.
1.1.1 2015FEMAStudy3
HJA was commissioned4 in 2015 to provide economic evidence to inform the development ofobjectively assessed housing need (OAHN) across theWest Essex and East Herts HousingMarketArea (HMA). The 2015 FEMA study included analysis to determine an appropriate functionaleconomic market area (FEMA) and consideration of future employment growth scenarios. Theoutputsofthe2015FEMAstudywereusedtoinformtheOAHNfiguressetoutinthe2015StrategicHousingMarketAssessment(SHMA)preparedbyOpinionResearchServices(ORS).TheconclusionofthestudywasthatthefourWestEssexandEastHertsCouncilsformedthecoreofaFEMAandshouldplanonthebasisof1,890jobsperannumovertheplanperiod2011-33.Afigureof400-455jobsperannum (c10,000over theplanperiod)was identified forEppingForestDistrict. The2015FEMAstudydidnotconsiderthelandandpropertyimplicationsofthesegrowthscenarios.
1.1.2 2015EFDCStudy5
Concurrent with the 2015 FEMA study, HJA was appointed by EFDC to prepare economic andemploymentevidencetosupportboththepreparationoftheemergingLocalPlanandtheCouncil’sEconomic Development Strategy. The 2015 EFDC study considered the recent and historicperformanceoftheDistricteconomy,itdrewonthe2015FEMAstudytoinformtheassessmentoffuturegrowthprospectsfortheDistrict,andconsideredtheimplicationsforemployment(primarily
1HJA(2017)WestEssexandEastHertfordshireAssessmentofEmploymentNeeds2Arup(2017)EppingForestDistrictLocalPlanEmploymentLandSupplyAssessment3HJA(2015)EconomicEvidencetoSupporttheDevelopmentoftheOAHNforWestEssexandEastHerts4JointlycommissionedbyEastHertsCouncil,EppingForestDistrictCouncil,HarlowCouncilandUttlesfordDistrictCouncil5HJA(2015)EconomicandEmploymentEvidencetoSupporttheLocalPlanandEconomicDevelopmentStrategy
2
BUseClass)sitesandpremises.The2015EFDCstudyalsoprovidedapartialupdatetothesupplysideanalysissetoutinthe2010EmploymentLandReviewalongsideanupdatedcommercialmarketreview. The conclusionof the studywas that thepotential growthof c10,000 jobsover theplanperiod gave rise to an estimated requirement for circa 27.5 – 31.4 hectares of B Use Class sitesacrosstheDistrict(2011-33).
1.1.3 2017FEMAStudy1
In2017HJAwasappointedtoprovideanupdatetothe2015FEMAstudyandextenditsscope.InadditiontoanupdateonpotentialgrowthscenariosacrosstheWestEssexandEastHertsareathework considered the future employment (B Use Class) sites and premises implications of thosegrowth scenarios. A headline summary of the 2017 FEMA study is set out in Chapter 3 of thisreport,asitformsanimportantcomponentoftheevidenceoffuturerequirementsfortheDistrict.
1.1.4 ArupSupplyReport
This constitutes a comprehensive update and replacement of the previous Employment LandReview6preparedbyAtkinsin2010.AruphascompletedanextensivereviewofexistingBUseClassemploymentsitesandpremisesaswellasappraisalsoffutureopportunitysiteswithintheDistrict.AheadlinesummaryoftheArupsupplyreportissetoutatChapter5ofthisreport.
1.2 StudyObjectives
TheprojectbriefsetoutthreecorerequirementsforthisEmploymentReview:
• ToproduceupdatedquantitativeassessmentofemploymentneedsfortheEppingForestDistrict;• Toconductanappraisalofthelocalcommercialpropertymarketanddigestnewemploymentland
supplyintelligencetoincorporateintotheReview;and• To provide clear and unambiguous recommendations to inform the future spatial strategy for
employmentinEppingForestDistrict.
The first requirement above flows directly from the 2017 FEMA study which is summarised inchapter3.
1.3 StructureoftheReport
Theremainderofthisreportissetoutasfollows:
Chapter 2 sets out a summary of the national policy and guidance relevant to the study andidentifieshowthishasbeenaddressed.
Chapter 3 sets out a summary of the 2017 FEMA study, which provides an assessment ofquantitativedemandrequirementsfortheFEMAandtheDistrict.
Chapter 4 sets out further District level commercial property market evidence, which draws onconsultationwithanumberoflocalstakeholderscoupledwithsupportingdataanalysis.
6Atkins(2010)EppingForestDistrictandBrentwoodBoroughEmploymentLandReview
3
Chapter5setsoutasummaryofthe2017Arupsupplyreport,whichconsidersboththeexistingandfuturepotentialsupplyofemploymentsitesandpremisesacrosstheDistrict.
Chapter 6 sets out recommendations for future spatial strategy for employment, drawing on therangeofevidencesetoutintheprecedingchaptersandsupportingdocuments.
4
2 PolicyandGuidance
Thischaptersetsoutasummaryoftherelevantpolicyandguidance.Itisacorerequirementofthebrief for the Employment Review that it is undertaken in line with national planning policy andguidance. The twomost relevant documents are theNational Planning Policy Framework (NPPF)7and Planning Practice Guidance (PPG) relating to Housing and Economic Development NeedsAssessments8.
2.1 NationalPlanningPolicyFramework(NPPF)
The NPPF notes that “the purpose of the planning system is to contribute to the achievement ofsustainable development) (paragraph 6). Sustainable development comprises three dimensions:economic, social and environmental. In fulfilling its economic role, the planning system needs toensure“thatsufficientlandoftherighttypeisavailableintherightplacesandattherighttimetosupportgrowthandinnovation”(paragraph7).
The NPPF notes that “every effort should be made to objectively identify and then meetthe…business…needsofanarea,andrespondpositivelytowideropportunitiesforgrowth”asaresult“Plansshouldtakeaccountofmarketsignals…andsetoutaclearstrategyforallocatingsufficientland which is suitable for development in their area, taking account of the needs of… businesscommunities”(paragraph17).
Paragraphs 18-22 of theNPPF deal specificallywith building a strong, competitive economy. Thisnotes that “Planning should operate to encourage and not act as an impediment to sustainablegrowth”(paragraph19),“localplanningauthoritiesshouldplanproactivelytomeetthedevelopmentneedsofbusinessandsupportaneconomyfitforthe21stcentury”(paragraph20),and
“IndrawingupLocalPlans,localplanningauthoritiesshould:
• Setoutacleareconomicvisionandstrategyfortheirareawhichpositivelyandproactivelyencouragessustainableeconomicgrowth;
• Setcriteriaor identify strategicsites, for localand inward investment tomatch thestrategyand tomeetanticipatedneedsovertheplanperiod;
• Support existing business sectors, taking account ofwhere they are expanding or contracting and,wherepossible, identify andplan for newor emerging sectors likely to locate in thearea. Policiesshouldbe flexible enough toaccommodateneedsnot anticipated in theplanand toallowa rapidresponsetochangeineconomiccircumstances;
• Planpositivelyforthelocation,promotionandexpansionofclustersornetworksofknowledgedriven,creativeorhightechnologyindustries;
• Identify priority areas for economic regeneration, infrastructure provision and environmentalenhancement;and
• Facilitateflexibleworkingpracticessuchastheintegrationofresidentialandcommercialuseswithinthesameunit.”(paragraph21)
7DCLG(2012)NationalPlanningPolicyFramework8DCLG(2015)PlanningPracticeGuidance[SectionreferenceID2a,foundat:https://www.gov.uk/guidance/housing-and-economic-development-needs-assessments(lastaccessed25/10/17)]
5
TheNPPFalsonotesthat“Planningpoliciesshouldaimforabalanceoflanduseswithintheirareasothat people can be encouraged to minimise journey lengths for employment, shopping, leisure,educationandotheractivities.”(paragraph37).SpecificallyindrawingupLocalPlanstheNPPFstatesthat“LocalPlans shouldbeaspirationalbut realistic” (paragraph154).TheNPPFalsosetsout theDutytoCooperateandtheneedforcross-boundary,collaborativeworking.
The above principles and guidance underpin the approach employed, ensuring a positive view offuturegrowthpotential,unencumberedbyconstraintbutgroundedinreality.Theapproachnotonlydealswiththeneedtoenablegrowthintheeconomybutfacilitatetheupgradingofexistingstockstoensureasupplyofemploymentpremisesfitforthe21stcentury.The2017FEMAstudycoupledwithlocalcommercialmarketintelligenceandconsultationensuresarobustevidencebase.
2.2 PlanningPracticeGuidance(PPG)
Planning Practice Guidance (PPG) provides further advice on undertaking economic developmentneedsassessments (section reference ID2a). Theentire section isof relevanceandhas informedthisReview, the2017FEMAstudyandtheArupsupply report. Thepurposeof theguidance is tosupporttheobjectiveassessmentandevidencingofneed.
Thisincludesthefollowingspecificguidance:
“The primary objective of identifying need is to identify the future quantity of land or floorspacerequired for economic development uses including both the quantitative and qualitative needs fornewdevelopment;andprovideabreakdownofthatanalysisintermsofqualityandlocation,andtoprovideanindicationofgapsincurrentlandsupply”.(PPGID2a-002)
“Plan makers should not apply constraints to the overall assessment of need, such as limitationimposed by the supply of land for new development, historic under performance, viability,infrastructureorenvironmentalconstraints.”(PPGID2a-004)
“Local planning authorities should assess their development needs working with the other localauthoritiesintherelevanthousingmarketareaorfunctionaleconomicmarketareainlinewiththeduty to cooperate. This is because such needs are rarely constrained precisely by local authorityadministrative boundaries.” (PPG ID 2a-007). The paragraph goes on to indicate the need for arange of stakeholders to also be engaged in the process from the earliest stage, including thepreparationofevidence.
“Needsshouldbeassessedinrelationtotherelevantfunctionalareaiefunctionaleconomicareainrelationtoeconomicuses…Establishingtheassessmentareamayidentifysmallersub-marketswithspecificfeatures”.(PPGID2a-008)
“Inunderstandingthecurrentmarket…planmakersshouldconsider:
• Therecentpatternofemploymentlandsupplyandlosstootheruses• Marketintelligence• Marketsignals• Publicinformationonemploymentlandandpremisesrequired• Informationheldbyotherpublicbodies
6
• Theexistingstockofemploymentland• Thelocationalandpremisesrequirementsofparticulartypesofbusiness• Identificationofoversupplyandevidenceofmarketfailure”(PPGID2a-030)
“Localauthoritiesshoulddevelopanideaoffutureneedsbasedonarangeofdatawhichiscurrentandrobust(PPGID2a-032)
Planmakersshouldconsider:
• Sectoralandemploymentforecastsandprojections(labourdemand)• Demographicallyderivedassessmentsoffutureemploymentneeds(laboursupply)• Analyses based on past take-up of employment land and property and/or future propertymarket
requirements• Consultation with relevant organisations, studies of business trends, and monitoring of business,
economyandemploymentstatistics”
TheapproachadoptedtothisReviewfulfilstherequirementsofPPG.The2017FEMAstudysetsoutadetailedquantitativeassessmentoffuturerequirements in linewiththeguidance.Thishasbeensupplementedwithlocalconsultationandmarketintelligencetoensurequalitativeissuesaretakeninto account. The FEMA studies directly address the need towork across boundaries, with localintelligenceensuringDistrictlevelcommercialmarketdynamicsarerecognisedandinformstrategy.
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3 WestEssexandEastHertsFutureRequirementsStudy
ThischapterisbasedontheExecutiveSummaryofthe2017FEMAstudy1.AdditionaltexthasbeenaddedtohighlighttheimplicationsforEppingForestDistrict.ThisreportwasveryrecentlypublishedandformsacentralelementoftheemploymentevidencebasefortheDistrict.Forfurtherdetailthefullreportshouldbereferenced.TheFEMAanalysiswasintendedtoprovideastrategicoverarchingevidencebase.Itdidnotincludeconsultationwithlocalcommercialmarketstakeholders.Chapter4thereforeprovidesadditionallocalinformation.
3.1 Introduction
Hardisty Jones Associates Ltd (HJA) was appointed by Epping Forest District Council (EFDC), EastHerts Council (EHC), Uttlesford District Council (UDC) and Harlow Council (HC) to provide anassessment of employment needs for the functional economic market area (FEMA) with theintentionofinformingfutureplanningforstrategicemploymentmattersacrossthearea.
The four councils were at different stages of preparation of their respective new Local Plans butworking jointly through the obligations of the Duty to Cooperate to consider strategic cross-boundarymatters. This jointworkingwas administered through the Cooperation for SustainableDevelopmentBoard.
Thefourcoreobjectivesforthestudywereto:
1. ConductanappraisaloftheEastofEnglandForecastingModel(EEFM)2016toascertainwhetheritwasasoundfoundationuponwhichtoformulateanup-to-dateassessmentofemploymentneedsfortheFEMA.
2. Produceanup-to-datebusinessasusual/‘policy-off’quantitativeassessmentofemploymentneedsintheFEMAusingtheupdatedEEFM2016andotherinputsasdeemedrelevant.
3. Explore an appropriate and agreed number of ‘policy-on’ employment need scenarios. Indetermining these, referring to the 2015 evidence produced by HJA3, as well as drawing on theemerging LocalPlansandknowledgeofnominatedPlanningOfficerswithin theFEMAand recenteconomic and housing growth evidence for the sub-region or smaller geographies within. It wasrecognisedthatanon-goingconsultativeapproachwasrequiredtosecureagreementtothescenariowhichwastobecomethebasisonwhichthefourlocalauthoritiesplannedforemploymentgrowth.
4. Based on the preferred scenario, translate the assessment of employment need into the landrequirement forBClassUses across the FEMAhaving regard to the current supplyposition, localeconomicstrategy,historictake-upandmarketdemand.
Thestudywasundertaken incompliancewith theNationalPlanningPolicyFramework (NPPF)andPlanningPracticeGuidance(PPG).
3.2 BaselineForecasts
TheEEFMprovidesconsistenteconomic forecasts for thewholeof theEastofEnglandregionandselectedotherareas.TheEEFMwasoriginallydevelopedbyOxfordEconomicswithitsfirstreleasein 2007 and regular updates to 2014. The latest 2016 release has been prepared by CambridgeEconometricsafteraretenderingofthecontract.
8
HJA reviewed the latest2016EEFMand identifiedanumberof substantive changes in the resultswithin theWest Essex andEastHerts FEMAwhen compared to the2014EEFM. Inparticular, thespatialdistributionofforecastemploymentgrowthwasverydifferent.Therewerealsosubstantialadjustments to sector growth forecasts. Following detailed review, it was agreed by the fourdistricts that the spatial distribution of future employment change within the 2016 EEFM wasinconsistentwiththeevidenceandamoderatedbaselineshouldbeconstructed.Thisreapportionedforecast employment growth across the FEMA in line with the 2014 EEFM. Somemoderation ofsectoral growth patterns was also undertaken. The conclusion of this process is a moderatedbaselineof33,100additional jobsacross theFEMAover theperiod2011-33.Figure3.1showsthetrajectoryofthemoderatedbaselineincomparisontothe2014and2016EEFMeditions.
Figure3.1ModeratedBaselineTotalFEMAJobs2011-33
Source:HJAbasedonEEFM
Table3.1showstheforecastemploymentchangebydistrictunderthemoderatedbaselinescenario.Thisforecastsgrowthof9,800jobsacrosstheEppingForestDistrictovertheperiod2011-33,thisisbroadlysimilarwiththeconclusionsofthe2015FEMAstudy.
Table3.1ModeratedBaseline–Employment(Jobs)ChangebyDistrict EastHerts EppingForest
DistrictHarlow Uttlesford FEMA
2011-16 3,700 3,000 5,000 5,000 16,8002016-21 2,300 2,500 700 1,300 6,7002021-26 1,600 1,900 400 400 4,3002026-33 1,800 2,400 600 500 5,3002011-33 9,400 9,800 6,700 7,200 33,100Source:HJAbasedonEEFM
180,000
190,000
200,000
210,000
220,000
230,000
240,000
250,000
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
TotalJob
s
2014EEFM
2016EEFM
ModeratedBaseline
9
3.3 AlternativeScenarios
A review of evidence was undertaken to ascertain whether alternative scenarios should beconsidered.
Analysis of the projected labour supply, emerging from the July 2017 Strategic Housing MarketAssessmentOANUpdate forWestEssexandEastHerts9 indicatesa levelofworkforcegrowth farbeyond that required to meet the demands of the moderated baseline. To maintain a balancedlabourmarket, with an appropriate level of unemployment and commuting patterns in line with2011rates,wouldnecessitateafurther20,000jobsoverandabovethemoderatedbaseline.Onthisbasis it is appropriate to consider whether higher employment growth scenarios could bedeveloped.
Four major drivers of additional job growth within the FEMA, over and above the moderatedbaselinewereidentifiedfromtheevidencereview:
• TherelocationofPublicHealthEnglandtoHarlow,creatinganadditional3,250jobsintheareaabovethemoderatedbaseline.
• TheplannedgrowthofLondonStanstedAirport,creatinganadditional6,750jobsintheareaabovethemoderatedbaseline.
• TheeconomicdevelopmenteffortsatHarlow, includingtheEnterpriseZone,creatinganadditional2,500jobsintheareaabovethemoderatedbaseline.
• Theservicesectoremploymentimplicationsofhigherpopulationprojections,creatinganadditional5,400jobsintheareaabovethemoderatedbaseline.
Inaggregatethefourgrowthdriverswereidentifiedashavingthepotentialtodeliver17,900jobsinadditiontothemoderatedbaseline.Apreferredscenariowasdevelopedandagreedincludingthesefourdrivers,deliveringatotaljobsgrowthof51,000overtheperiod2011-33.Thisisillustratedinfigure3.2andtable3.2.
Thepreferredscenario remains2,100 jobsbelowthe level required tobalance the labourmarket.However,giventhattherearesomeuncertaintiesassociatedwithjobsforecastingandthelong-termnatureofLocalPlans,suchascaleofadditionalprovisionovertheFEMAareaupto2033doesnotrepresent any significant short-termdifficulties for emerging Local Plans. In reality the additionalprovisionmay be accommodated through increased job densities and / orwindfall development.TheFEMAauthoritiesarecommittedtoworkingtogethertoensurethatthisadditionalprovisionwillbeaccommodated.
Table 3.2 sets out the district level position. This shows an increase in the total jobs growthforecasted for Epping Forest District to 10,800. This is 1,000 jobs above themoderated baselinescenarioandhigherthanthelevelforecastwithinthe2015FEMAstudy.However,themajorityofadditionaljobgrowthwithinthepreferredscenarioisfocusedatUttlesfordandHarlow,asaresultofknownmajorinvestments.
9ORS (2017)West Essex and East Hertfordshire Strategic HousingMarket Assessment, Establishing the Full ObjectivelyAssessedNeed
10
Figure3.2PreferredScenarioTotalFEMAJobs2011-33
Source:HJA
Table3.2PreferredScenario–Employment(Jobs)ChangebyDistrict EastHerts EppingForest
DistrictHarlow Uttlesford FEMA
2011-16 3,600 2,900 4,900 7,400 18,9002016-21 2,300 2,500 2,100 3,700 10,6002021-26 2,200 2,300 3,500 3,000 10,9002026-33 2,700 3,000 2,900 1,900 10,6002011-33 10,800 10,800 13,400 16,000 51,000Source:HJA(figuresmaynotsumduetorounding).
Figure3.3illustratestheforecastchangeinjobsbysectorwithintheeconomyovertheperiod2011-33. This highlights the strength of the construction sector in Epping Forest District which hasexperienced significant growth in the period 2011-16 in jobs terms and is forecast to continue togrow. From 2016 onwards there is forecast jobs growth in the majority of sectors, with theexceptionofprimaryindustriesandmanufacturing,alongsidebroadlyflatexpectationsforthewasteandutilities,transport,financeandpublicadministrationsectors.
190,000
200,000
210,000
220,000
230,000
240,000
250,000
260,000
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
TotalJob
s
ModeratedBaseline
GrowthUplift- PreferredScenario
11
Figure3.3ForecastJobsChangebySector2011-33inEppingForestDistrict
Source:HJA
3.4 EmploymentLandImplications
An assessment of the future B Use Class employment sites and premises requirements wasundertaken. This included a considerationof the changes required to accommodate the forecastgrowth in the economy under the preferred scenario, aswell as provision to ensure the ongoingstrength of the existing economy. The analysis of future requirements considered the 2016-33period10.
AnalysisofforecastemploymentindicatedasubstantialproportionofforecastjobgrowthwouldlieoutsidetheBUseClass.Thelargestrequirementfallswithinthe‘noneandhomeworking’category,encompassing both home basedworking and peripatetic employment. There is also forecast jobgrowthacrosstheA,B,C,DandSuiGenerisUseClasses.WithintheBUseClassthegreatestgrowthin jobsfallswithintheB1aofficeUseClass.ThereisalsogrowthinB1b,B1candB8requirements.EmploymentwithintheB2UseClass is forecasttodecline.Figure3.4 illustratesthedistributionofjobschangeacrossUseClassesoverthefullplanperiodfortheFEMA.
10Onthebasisthattheperiod2011-16hasbeencompleted.The2011-16periodalsoincludestherecoveryfromthepost2008economicdownturn,withcapacity in theeconomy (including the labourmarketandcommercial floorspace)beingusedup.At2016theeconomywasatamoreneutralposition.
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Jobswith
inEppingForestDistrict
2011 2016 2021 2026 2033
12
Figure3.4EmploymentChangebyUseClass2011-33
Source:HJA
Table 3.3 summarises the assessment of future B Use Class floorspace requirements for thepreferredscenarioacrosstheFEMA.This issubdividedintoofficeandindustrial (including logisticsanddistribution)classifications.
Withintheofficesectorthereisforecasttobearequirementfor77,800sqmofnewfloorspacetoaccommodateexpansionoftheeconomy.Inaddition,afurther83,500sqmofofficefloorspacewillberequiredtoensureahealthystockofpremisestoaccommodatetheexistingeconomy.Intotal,arequirementfor161,300sqmisidentified.Theanalysishasidentifiedthataroundhalfofthiscanbe delivered through the reuse of previously developed employment sites. After taking this intoaccount,andmakinganadjustmentforchoiceandflexibility,theremainingrequirementis86,800sqm.Thiswillrequireapproximately9-22hectaresoflandovertheperiod2016-33,dependingonthedensityofdevelopment.Thelowerfigurerelatestohigherdensitytowncentretypedevelopment.Thehigherfigurerelatestolowerdensitybusinessparktypedevelopment.
Withintheindustrialsectorthereisaforecastrequirementfor92,800sqmtomeettheexpansionofthe economy. The greatest driver in this sectorwill be replacementprovision, to ensuremodernstockstomeettheneedsoftheexistingeconomy.Thiswillcreatearequirementfor412,200sqm.In combination, a total requirement of 505,000 sqm is forecast. Around half of this can bemetthroughtheredevelopmentofpreviouslyusedemploymentsites.Theremainder,withanallowanceforchoiceandflexibilityisestimatedat261,500sqm.Thiswillrequireapproximately65hectaresoflandovertheperiod2016-33.
-5,000
0
5,000
10,000
15,000
20,000
25,000
A1 A2
A3-5
B1a
B1b
B1c B2 B8 C1 C2 C3 D1 D2 SG
None&Hom
eworking
ChangeinEmployment2
011-33
ModeratedBaseline GrowthUplift- PreferredScenario
13
Table 3.3 Preferred Scenario - Total Estimated Future Sites and Premises Requirements(sqmGEAunlessstated)–FEMA2016-33
Office IndustrialReplacementProvision(A) 83,500 412,200NetAdditionalRequirement(B) 77,800 92,800GrossRequirement(C=A+B) 161,300 505,000DeliveredonExistingEmploymentSites(D) 82,400 267,300NetRequirement(E=C-D) 78,900 237,700FlexibilityAllowance(F) 7,900 23,800TotalRequirement(G=E+F) 86,800 261,500AverageAnnualRequirement 5,106 15,382TotalLandRequirement 9–22ha 65haAverageAnnualLandRequirement 0.5-1.3ha 3.8haSource:HJA(figuresmaynotsumduetorounding).
Asnotedinsection3.3,thereremainsasmallshortfallinforecastjobstobalancethelabourmarketandmaintain2011commutingrates.Itisestimated,inlinewiththecoreanalysis,thatwithoutanyincrease indensitiesafurther6,400sqmofofficefloorspaceand8,700sqmindustrial floorspacewillberequiredwithintheFEMAareatoaccommodatetheshortfall.Thiswillrequireafurther2.8–3.8hectaresoflandinadditiontotherequirementssetoutintable3.3.TheunallocatedfigurewillneedtobeaccommodatedwithintheFEMAthroughagreementbetweenthedistricts.
Table3.4setsoutthebreakdownbydistrict.Thisindicatesarequirementof2-5haforofficesand14hafor industrialusesacrossEppingForestDistrict. This is lowerthanthefiguressetoutwithin2015EFDCstudy5.Firstly,the2015analysisconsideredthefullperiod2011-33,asaresultthere isnot direct alignment between the two studies. Secondly, there has been some refinement in thequantitative methodology employed. Thirdly, the underlying data and economic scenarios havebeenupdated.
Table3.4TotalEstimatedFutureSitesandPremisesRequirements(haunlessstated)2016-33
Office IndustrialEastHerts 3-7 13EppingForestDistrict 2-5 14Harlow 2-4 16Uttlesford 2-5 22AdditionalProvisiontoBalanceLabourMarket 1–2 2WestEssexandEastHertsFEMA 10-24 68Source:HJA(figuresmaynotsumduetorounding).
Table3.5setsoutmoredetailedanalysisfortheEppingForestDistrictposition.
14
Table 3.5 Preferred Scenario - Total Estimated Future Sites and Premises Requirements(sqmGEAunlessstated)–EppingForestDistrict2016-33
Office IndustrialReplacementProvision(A) 18,900 84,700NetAdditionalRequirement(B) 14,000 1,000GrossRequirement(C=A+B) 32,900 85,700DeliveredonExistingEmploymentSites11(D) 13,200 34,300NetRequirement(E=C-D) 19,700 51,400FlexibilityAllowance(F) 2,000 5,100TotalRequirement(G=E+F) 21,700 56,500AverageAnnualRequirement 1,280 3,320TotalLandRequirement(ha) 2-5 14AverageAnnualLandRequirement(ha) 0.1-0.3 0.8Source:HJA(figuresmaynotsumduetorounding).
Table 3.6 shows the estimated requirement through the plan period. This assumes replacementdemandisspreadevenlyacrosstime.Inrealitythedemandandsupplyofsitesandpremisesislikelyto be far more lumpy and driven by broader commercial market conditions. The figures shouldtherefore be viewed as an indicative guide. Overall they show a broadly even requirementthroughouttheplanperiod,reflectingthespreadofreplacementdemand.
Table3.6PreferredScenario–TotalEstimatedFutureSitesandPremisesRequirementsby5-yearPeriod
2016-21 2021-26 2026-33 2016-33OfficeFloorspace(sqm) 7,400 6,000 8,300 21,700OfficeLand(ha) 0.7–1.9 0.6–1.5 0.8–2.1 2-5 IndustrialFloorspace(sqm) 18,800 16,000 21,700 56,500IndustrialLand(ha) 5 4 5 14Source:HJA(figuresmaynotsumduetorounding).
11InEppingForestDistrictrecentdevelopmentpatternssince2011indicate40%ofgrossdevelopmenthasbeenachievedthroughtheredevelopmentofpreviouslydevelopedemploymentland.Thisisslightlyhigherthanthelong-termaverage(34%). In absolute terms the pattern is reversed. Over the long-term an average of 6,580 sq m per annum of grossdevelopmentonpreviouslydevelopedemploymentlandhasbeenachieved.Thishasfallentobelow5,000sqminrecentyears,reflectingtheloweroveralllevelsofdevelopmentactivitywhichareconsistentacrosstheFEMA.Afigureof40%wasadoptedortheforecastanalysisovertheperiod2016-33.Inabsolutetermsthisequatesto2,790sqmperannum,belowhistoricratesofsitere-use.
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4 CommercialMarketReview
This chapter draws on a series of consultationswith key local stakeholders aswell as supportingevidencewhererelevant.AlistofconsulteesissetoutatAppendix1.
4.1 TheFunctionalEconomicGeographyoftheDistrict
4.1.1 FunctionalEconomicMarketArea(FEMA)
TheDistrict fallswithin a FEMA that extends across theWest Essex and EastHerts area. FEMA’stypically have very fuzzy boundaries and retain linkageswith areas outside the core. For EppingForestDistrictthisincludesstronglinkstothenorthLondonfringeandtocentralLondonaswellaswithneighbouringareasalongtheM25. FurtherdetailsondefiningtheFEMAaresetoutin2015FEMA3andEFDC5studies.
4.1.2 SubAreas
TheDistricthas twobroad sub-markets in termsofemploymentproperty,withinandoutside theM2512.However,thedistinctionisnotseenasstrongbyallconsultees.Thisdividinglineisevidencedin the way commercial agents structure their businesses and is also reflected in the differentcharacterisationof the areas.Within theM25 (e.g. Loughton andDebden and includingWalthamAbbey) ismoreurbananddenselypopulatedandhas strong links to Londonvia theCentral Line.OutsidetheM25ischaracterisedbysmallertownsandmoreruralemploymentsites.Thisconceptoftwomarketareasisconsistentwiththefindingsofthe2015EFDCstudyasshowninfigure4.1.
Figure4.1SubAreas
12 Some consultees suggested the area around theM25 could be its own sub-market area but this was not generallyindicated.
16
Consulteeswereaskedabout ‘hotspots’and ‘notspots’. ThegeneralviewwasofstrongdemandthroughouttheDistrict,particularlyforsitesthatareaccessibletothecoretransportinfrastructure(M11,M25andCentralLine).LoughtonandWalthamAbbeywereidentifiedasparticularhotspots(M25zone).
TheDistrictabutsHarlow.However,thereisnoindicationthattheemploymentofferoftheDistrictiscurrentlyservingtheHarlowmarket.ItwasreportedthatbecauseofexistingcongestionissuesinandaroundHarlowthatEppingForestDistrict ispotentiallyamoreattractivelocationifsitesweremadeavailable.Inshapingpolicyitwillbeimportanttoconsiderhowanyallocationsmightimpacton FEMA wide economic development aspiration focused around Harlow and the potentialimplicationsofM11Junction7aproposalswhichcouldaddresscongestionissues.
Thebroadspatialdistributionofactivityisnotperceivedtohavechangedmuchoverthelast15-20years.Whenaskedaboutpotential forchange inthefuture, themajoropportunity is identifiedasNorthWealdAirfield.ItwasconsideredthattheextensionoftheCentralLinetothislocationwouldbeverysignificant.
4.1.3 ExistingAssetsandDrivers
Accessibility is a key asset with theM11,M25 and Central Line all identified as critical transportinfrastructure thatmakes theDistrict an attractive economic location. As a result theDistrict hasstrong links to London, Stansted and other important locations. Coupledwith lower costs thanLondonlocationsthisisakeyassetfortheDistrict.Increasingcongestioncouldweakenthisexistingstrength,althoughitwasacceptedthisisnotuniquetotheDistrict.Itwasnotedthatasaresultofcongestionsemi-rurallocationswithseeminglyweakaccessibilityhadbecomemoreattractive.
AsupportiveattitudewithinEFDCeconomicdevelopmentteamwasalsocitedbyconsultees. TheCouncil’seconomicdevelopmentteamisseenaspro-developmentforemploymentandsupportiveofdevelopers. However, itwasperceived thatEFDCplanningand theParishCouncils canbe lesssupportive.
The area offers a high quality of life and is therefore an attractive place to live, work and dobusiness. Itwas reportedbymultipleconsultees that themarket for start-upbusinesses is strong,reflectedinhighlevelsoftakeupoffacilitiessuchastheEssexTechnologyandInnovationCentreinOngar.TherecentexpansionattheCentrewasreportedtohavebeentakenupalmostimmediately.Other providers of similar space reported high take up. These start ups are reported to bepredominantly driven by those living in the area,with congestion a deterrent to traveling furtherthanisnecessary.
OthercommentsweremadeaboutnonBUseClasseconomicdrivers,particularlyaroundtheageingpopulationandtheimplicationsforcareandotherdomesticservicesectors.
4.1.4 FutureAssetsandDrivers
Whenaskedaboutfuturedrivers,theinfluenceofLondon,withbusinessesbeingpushedoutofthecapital, isexpectedtofuelcontinueddemandintheDistrictgivenitscloseproximity.Thisisbeingheightenedbythede-industrialisationofnorthandeastLondonasresidentialdevelopmentreducesemployment supply. Smaller distribution sites (less than 50,000 sq ft) that can serve London are
17
expectedtobecomeafeatureofdemand.ThesewillbeattractedtotheedgeofLondonlocationswithinandaroundtheM25.
TherelocationofPHEtoHarlowisalsoseenasapotentialfuturedriver.ThiscouldfurtherbolsterexistingactivityinthelifesciencessectorwithinEppingForestDistrictandtieinwiththeambitionsoftheLondonStanstedCambridgeCorridor(LSCC).Repeatedlythelogisticsandlifesciencessectorswerecitedaskeyopportunitysectorsalongsidenewstartbusinesses.
Overall therewas a sentiment that theDistrict could performmore strongly over the next 15-20years than the last 15-20 years if the right enabling is put in place, including employment sites.However, there is concern that the focus is upon solving the housing crisis at the expense ofdeliveringemploymentspaceandasaresultadditionalemploymentlandisnotbeingreleased.Newallocations are therefore required to facilitate new development. Thosewith good access to theM11,M25orCentralLinewereindicatedasthemostattractiveinmarketterms.
4.2 PropertyMarketDynamics
4.2.1 RentalLevelsandLandValues
Consulteeswere asked for information on rental and land values. The commercialmarket acrossEpping Forest District is not subject to widespread analysis bymajor commercial agents with in-houseresearchteams.However,Glenny13providesanalysisoftheEssexcommercialmarket,thishasbeenusedtobenchmarkconsulteecomments.
Thequalitativeviewprovidedbyconsulteesisthatpricesaregenerallyrisingassupplyisreducedforbothofficesandindustrial.ThisiscorroboratedbytheGlennyresearch.
Offices
Glenny analysis shows Grade A office rents across Essex rose over the period 2012-2015 beforelevelling off, however secondary rents are continuing to rise. Office availability across Essex hasbeenfallingsince2013,particularlyforsecondhandstock.Officetakeupacrossthecountyfellbackin2016aftertwostrongyearsabovetrend.Thisislargelyduetolargerrequirementsbeingmetorwithdrawn.However,astrongup-turninsmallerrequirementsisnoted,increasingby56%overthelast6monthstoMarch2017.
ConsulteesreportedthefollowingrentalvaluesforEppingForestDistrict:
• Typically£12–£15psfinEppingfallingto£10psfinruralareas. Thisisbroadlyinalignmentwithsecondary rental values or lower grade office centres within the Glenny analysis (areas such asBrentwoodorChelmsfordcommandhigherGradeArents).
• Essex Technology and Innovation Centre, Ongar (managed workspace) typically £22 psf includingsomeutilities.
• SmallbusinessunitsatCr@teLoughtonandGrangewoodHouse typically£48–£54psf (basedon£900–£1,200permonthfor200–300sqftunit)allinclusive.
13Glenny(2017)DatabookQ12017[foundathttp://www.glenny.co.uk/wp-content/uploads/2017/05/databook.pdf,(lastaccessed26/10/17)]
18
Industrial
Glenny analysis again shows steady rises in rents and capital values for industrial stock based ontheircountywidemonitoring.Industrialtakeupwasveryhighinthesecondhalfof2016atalmostdoubletheten-yeartrend.Thismayhaveincludedsomerecoveryfromadipinthefirsthalfoftheyear.Firstquarter2017hasseenafallbacktowardstrend. Verystrongperformance in2016wasfuelledbysomeverylargedeals, includingwithonedealwithAmazonatLondonDistributionPark(Tilbury)accountingfor60%oftakeup.Secondhandavailabilityhasfallenconsistentlysince2013withGradeAavailability increasing since2014-15. Total levelsof availabilitywithin the industrialsectorappeartobefairlyflatacrossthecountyoverthelast3yearsbutthemixofsecondaryandGradeAhasshiftedsubstantiallytowardsgradeA.ItisreportedthatalotofthegradeAavailabilityisinlargerunitsabove50,000sqft.
ConsulteesreportedthefollowingrentalvaluesforEppingForestDistrict:
• Typically£6–£10psfwithfiguresof£12–£15psfachievedonsmallerunitsizes• This broadly alignswithGlenny analysis indicating prime rents as £8.75 – £9.50 across the survey
areas,comparedto£7.50–£8.25forsecondarystock.
4.2.2 LandValues
Tworecentdealswerecitedfor£2.5mperacreatWalthamAbbeyand£5mperacreatLoughton.
4.2.3 GrowOnSpace
Research forEssexCountyCouncil14 founda shortageof growon space15 across the county. Thisfoundaone-yearsupplyofindustrialgrowonspaceand2.5-yearsupplyforofficegrowonspace.Inaddition what was available was generally Grade B with little new space being built. The studyidentifiedmarketfailurerelatingtothedeliveryofgrowonspace.Itisnotanattractivepropositionfordevelopersgiventhehighrisksassociatedwithsmaller,youngerbusinesseslookingforshortandflexible tenancies. This is exacerbated by a shortage of land and far higher andmore attractivevaluesforotherdevelopmenttypes,notablyhousing.
4.2.4 DevelopmentActivity
HJA has analysed planning permissions data held by EFDC. This covers the period 2006/07 –2014/15.
Planningpermissionsdatadiffersfromcompletions16databutisthebestavailableindicatoroflevelsofactivity. Arandomsampleof25permittedapplicationsovertheperiod2007-15wastestedforimplementation.Thisfoundthattenapplicationshaddefinitelybeenimplemented.Theremainderwereunknown.Nonewereknowntonothavebeenimplemented.Onthisbasisthefiguresshouldbeviewedasamaximumpotentiallevelofactivityandinalllikelihoodanoverestimate.Thedata
14SQWandBBPRegeneration(2016)Grow-OnSpaceFeasibilityStudy15Growonspaceisdefinedasthatrequiredbybusinessesofaround10+employees,in-betweenthefacilitiesofferedbyincubatorsorenterprisecentresandmovingintostandaloneofficesoffactory/workspaceunits.16Completionsdataidentifiesthatwhichhasbeenbuilt.Theplanningpermissionsdatausedforthisanalysisonlyindicateswhetherpermissionhasbeengranted.Onthisbasisitshouldbeinterpretedasanabsolutemaximum.
19
recordingmethodcanalsoleadtooverstatementofscaleinsomeinstances17.Thisexacerbatestheriskofoverstatementofactivity.
Figure4.2 illustrateshistoricplanningpermissions. Thishighlightsanumberof issues. Firstly theerraticandlumpynatureofthemarket,withveryunevendata;secondly,thesignificantweakeningof themarket from2009-10 onwards; thirdly, significant gross levels of activity (gains and losses)thatareoftenmaskedifonlynetfiguresareconsidered;andfourthly,significantpermittedlossesofBUseClassfloorspacein2014-15.
Figure4.2HistoricBUseClassPlanningPermissions2006/07–2014/15
Source:HJAbasedondataprovidedbyEFDC
Table 4.1 sets out the figures in more detail. Over the long-term period the average annualpermittedgrossgainsare19,270sqmperannum.Whenconsideringtheshorter-termtrendfrom2011/12onwardsthisisreducedto12,100.Whenconsideringpermittednetchange,overthelongtermthedatasuggestsagainof6,560sqmperannum.Overtheshortertermthisactuallyindicatesanetlossof930sqmperannum.Thisisparticularlyinfluencedbysignificantpermissionsforlossesintheyear2014-15.
17ThedatadoesnotseparateUseClasses.Asaresult,someschemesincludedBandnonBUseClassesandthequantumofeachisnotclearlydemarcated.ThisleadstothereportedfiguresoverstatingBUseClasspermissions.
-30,000
-20,000
-10,000
0
10,000
20,000
30,000
40,000
50,000
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15Perm
itted
Floorspaceinsq
m
GrossCompletions GrossLosses NetChange
20
Table4.1HistoricBUseClassPlanningPermissions
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
GrossGains 44,616 31,520 37,279 6,039 5,526 11,075 6,386 23,447 7,555
GrossLosses 39,476 5,979 5,246 8,201 3,304 10,155 8,984 6,253 26,779
NetChange 5,140 25,541 32,032 -2,162 2,221 920 -2,598 17,194 -19,224
Source:HJAbasedondataprovidedbyEFDC
4.2.5 BarrierstoDevelopment
Thelargestbarriersareconsideredtobe:
• Pooravailabilityofdevelopmentsites,whichisexacerbatedby…• Strongdemandforresidentialdevelopmentforcinguplandvalues,whichmeans…• Landvaluesaregenerallytoohighforviableemploymentdevelopment.
Itwasreportedthatsitesthatdonothaveanyprospectofresidentialdevelopmentarethesitesthatwork.ThisisinkeepingwithcommentsmadetoHJAinotherpartsoftheUK.
The Green Belt further hampers the situation in the District, reducing the number of potentialopportunity sites. Other issues include a lack of parking and adjacent residential developmentconstrainingemploymentsites.
4.2.6 OpportunitiesforDevelopment
Itwas indicated that EFDC has the potential to domorewith its own portfolio of sites to enableemployment development. This includes improving what in some cases are now tired industrialpremises.ItwasreportedthatthiswillrequireashiftinEFDCsapproachfromviewingitspropertyportfolioasashort-termcashgeneratortoacoredriverofeconomicdevelopmentintheDistrict.
North Weald Airfield was repeatedly highlighted as a key opportunity site with the potential tobecome an important employment location in its own right, particularly if the correct supportinginfrastructurecouldbeprovided(includingextensionoftheCentralLine).
4.2.7 PermittedDevelopmentRights(PDRs)
ConsulteeswereaskedabouttheimpactsofPDRsontheofficesectorspecifically.ItwasreportedthattheeffectsofPDRscouldbeweakernowthantheywereafewyearsago.Itwasnotedthatonepositive is that it has pushed office occupiers towards established employment areas, leading togreaterconcentrationsofactivityand‘buzz’.ItwasalsoreportedthatPDRshavealsomeantsometenantsareusingindustrialpremisesprimarilyforofficeusesastheyarecheaperthanpurposebuiltoffices.
21
UKwidetheavailabilityofcommercialpropertyin2014wasreportedtohavebeendecliningatitsfastestratesince1998sincetheintroductionofPDRs18.However,therearealsopositivesreportedwherepoorerqualitystockislostandrisingrentalvaluesmakenewdevelopmentmoreviable.
TheArupsupplyreport indicatessome158,580sqmofB1aofficesacrosstheDistrict. AnalysisofPDR approvals indicates in excess of 6,000 sq m19 of B1a floorspace subject to PDRs up to June201620.Thisbroadlyequatestoaround1%-1.5%ofofficestocksperannumatrisk.ItisestimatedaroundhalfofthishasbeenimplementedbyJuly2017,equivalenttoaround0.6%ofofficestocksper annum being lost. Of the 20 schemes listed two had been refused, 11 had not beenimplementedandsevenwereeither implementedor in theprocessofbeing implemented. If thistrendcontinuestherewillbeagradualerosionoftotalofficestocks.
4.3 ExistingStocks
4.3.1 Quality
Consulteesreportedageneralshortageofstock,particularlyofagoodquality,acrosstheDistrict.Itwas reported that a significant proportion is ‘tired’. It was also noted that many existingemployment sites don’t offer the rangeof support/complementary facilities that are attractive tomodernoccupiersandworkerse.g.cafesandleisurefacilities.
It was stated that office stocks are getting poorer over time and rental levels do not enableinvestment to take place. At the same time development activity is low so there is insufficientupgradingofthesupplyoverall.Itwasreportedthattherewillnotbemeaningfulnewdevelopmentuntilrentsrise.
Industrial stockwas indicated to have a significant proportion that is poor quality, especially thatownedbyEFDC.Consulteesconsidertheretobealotofolderstockandnotalotofmodernsupply.Thisagainflowsfromlimitedlarge-scaledevelopmentinthelast20yearsotherthaninfillschemes.ItwasnotedthatthisageingoftheindustrialstockwithinsufficientinvestmentisnotuniquetotheDistrictbutageneralissueacrosstheUK.Itwashighlightedthatmoremodernsupplycandraguprental values, but with limited new development this has not taken place across Epping ForestDistrict.
ItshouldbenotedthattheArupsupplyreportcategorisedonlyc9%oftotalemploymentfloorspaceas poor and c30% as fair. The majority c61% is recorded as good. This may indicate relativelynegativeperceptionsamongthestakeholdersinterviewed.
4.3.2 NeedandOpportunityforReplacementandRegeneration
Therewasageneralviewacrossstakeholdersofaneedtoupgradetheoverallstockofemploymentpremises across the District. This need is anticipated to increase as the stock base becomesincreasingly unsuitable. There is also a view that new legislation on minimum energy efficiencystandardsinApril2018willforcelandlordstoinvest.AreassuchasLoughton,DebdenandWaltham
18RICS(2014)UKCommercialMarketSurvey,Q219Of20schemeslistedninedidnotincludedataonthequantumoffloorspaceatrisk.20DatasinceJune2016 is incompleteanddoesnotprovidefloorspacefigures. Of fivefurtherschemes listedsincethatpointfourareindicatedaseitherimplementedorintheprocessofbeingimplemented.
22
Abbeywerespecificallycited.ConsulteesreportedthepotentialformuchgreaterintensificationofsitesinLoughton,transformingtheareafromanindustrialareatoabusinessarea.
Thechallengesofregeneratingwhenstock isoccupiedwerenoted. Itwassuggestedthatthiswillrequireproactiveapproaches includingnewsupply toallowolderredundantstocks tobevacated,andpossiblytheuseofCPOpowerstosecureexistingsitesforredevelopment. However,suchanapproachwillinvolverisk.
4.3.3 ParticularGapsinSupply
Consulteesreportedageneralshortageofsupply.Thefollowingwerereportedasparticulargapsintheportfolioofsupply:
• Unitsof1,000sqftandbelow• Industrialfreeholdunitsof1,000–5,000sqft• Moveon/growonspace• Large21officedevelopmentsbeyondLoughtonandDebden• 10,000–40,000sqftdistributionwarehouses• Freeholdunits• Live-workspace
Glennyanalysisacrossthecountyreportsthatthemajorityofofficerequirementsarefor0-5,000sqft, representing almost half (47%) of total requirements by floorspace, compared to 17% ofavailability.17%ofdemandisfor5,000–10,000sqftcomparedto8%ofavailability.36%is10,000–25,000sq ftcomparedto42%ofsupply. 33%ofsupply isgreater than25,000sq ftagainstnorequirements.Thiswouldsuggestageneralgaparoundsmallerscaleofficespace.
Within the industrial sector Glenny reports that requirements across the size spectrum but withevidenceofoversupplyoflargerstock.47%ofdemandisreportedforunitsgreaterthan50,000sqftcomparedto57%oftotalavailability. There isstrongerdemandforunits lessthan25,000sqft(particularly 5,000 – 10,000 sq ft). It is reported that the demand for larger units (greater than25,000sqft)iswheretherehasbeenadipinactivity.Thiswouldcorroboratetheviewssharedbyconsultees.
Thegeneral trend towardssmaller size fitswith thestrongstartupculture that is reported in theDistrict.
4.3.4 Over-supply
Consulteeswereaskedwhethertherewereparticularpropertytypesthatareinover-supply.Nonewere reported, although it was indicated that there is relatively low demand for large industrialpremises. Theareaisreportedtohaveaverylowvoidrateoverall. ItwasnotedthatthelossofofficesthroughPDRhasreducedanyover-supplythatmayhavebeenpresentpreviously.
21Thiswasnotquantifiedintermsoffloorspacebutwasnotedas‘formorethan10people’whichmaybelargeforEppingForestDistrictbutwithinthebroadercommercialmarketwouldbedeemedasfairlysmall.
23
4.4 HeadlineTrends
Inadditiontothelocallyspecificinformationsetoutinthischapter,Appendix2setsoutasummaryof overarching employment property trends across the office, manufacturing and distribution &logisticssectors.ThekeymessagesemergingfromthisanalysisrelevanttoEppingForestDistrictare:
Offices
• Nationally there has been a trend towards office concentrations within urban cores. However,demandcontinuesinmoreperipheralandoutoftownlocations.
• Businessesarepayinggreaterattentiontothewellbeingoftheirstaffmeaningproximitytoservicesandamenitiesisincreasinglyimportant.
• Despite reductions in average office floorspace per employee and the increase in flexibleworkingpracticestherecontinuestobestrongdemandforofficestoaidemployeeinteraction.
• Whilstofficedensificationisontheincreasethisdoesn’tnecessarilymeansmallerfloorplates.Smallerworkspaces are inmany casesoffsetbymeeting spacesorotheron-site facilities. Densification isthoughtlikelytoplateau.
• Flexibilityofcovenantisimportantforemergingbusinesses.
Industrial
• Technological advancements and the growth of new industries and sectors generate differentpropertyneedstotraditionaloccupiers. Thiscangenerateanincreasingmismatchbetweensupplyanddemandwithmanyoldersitesbecomingeconomicallyandfunctionallyobsolete.
• Marketconditionscanleadtoverylowrentsonolderfloorspace.Suchsubduedvaluesresultingfromtheageandconditionofthestockdiscouragespeculativedevelopment.
• There will continue to be a demand for appropriate facilities which meet changing modernoperationalrequirements.
• There is a general consensus that the manufacturing and industrial property market will trendtowardssmallerlocalandurbansites.
• Advancementsinautomationandroboticswillalsoreducethefootprintsofsites.• Increasingsupplychainintegrationwillimpactonthepropertymarket,leadingtoclusteredhubs.• The trend is towardspremises thatareattractiveplaces inwhich toworkandwhich includemore
spaceforcustomers,clientsandotherbodiesratherthanproductionspace.
Distribution&Logistics
• Demandisexpectedtoincreaseasaresultofincreasinguseofecommerce.• Thedemandforlargeregionaldistributioncentreswillbemaintainedalongsidethedevelopmentof
smaller local units located on urban peripheries that will meet the growing demands of onlineconsumers.
• The use of Unmanned Aerial Vehicles (UAVs) has the potential to significantly impact last miledistributionbutisstillinitsinfancy.
24
5 SupplyAssessment
ThischapterprovidesaheadlinesummaryoftheArupsupplyreport2.Thisincludesconsiderationofboththecurrentsupplyofemploymentsitesandpremisesandtheassessmentofpotential futuredevelopmentsites.Forfurtherdetailthefullreportshouldbereferenced.
The review identified and assessed in detail 75 employment sites across the district22. 65 wereexistingemploymentareasand10werenewsiteswhichhavenotbeenpreviouslydeveloped.
5.1 CurrentSupplyofEmploymentSitesandPremises
5.1.1 SupplybyUseClass
Table5.1providesascheduleofBUseClasslandandfloorspaceacrossthe60existingemploymentsitesintheDistrict(excludingthefivesiteswhicharewhollyvacantorderelict).Atotalof160haisidentified, on which some 676,400 sq m of built floorspace is accommodated. B8 storage anddistributionactivitiescomprisethelargestshareofbothlandandfloorspace,accountingforaroundhalfofthetotal.B1aofficeactivitiesaccountforaroundalittleover20%oflandandfloorspacewithB1clightindustrialaccountingforalittleunder20%offloorspace.B1bresearchanddevelopmenthardlyfeaturesandB2generalindustrialaccountsforaround10%ofexistingsupply.Thisreflectsthe industrial profile of the District with less than 4% of employment within the manufacturingsectorcomparedtoanaverageof8%acrosstheEastofEnglandandGreatBritain(BusinessRegisterandEmploymentSurvey,2015).
Table5.1EmploymentLandandFloorspacebyUseClass
BUseClass Employmentland(ha)
Floorspace(sqm) %oftotalland %oftotalfloorspace
B1(a) 33.81 158,580 21% 23%
B1(b) 0.61 479 0% 0%
B1(c) 20.42 130,727 13% 19%
B2 17.53 67,899 11% 10%
B8 87.76 318,723 55% 47%
Total 160.13 676,408 100% 100%
Source:Arup(Table7)
5.1.2 SupplybyLocation
TheArupsupplyreportprovidesanalysisofexistingsupplybyParish.Table5.2belowpresentsthesamedataacrossthetwosub-areasidentifiedatfigure4.1ofthisreport.
22Sitesweredeemedeligibleforassessmentiftheyincludedaminimumof0.2haofBUseClassdevelopment,
25
Of the65existingemploymentsitesassessedbyArup50 (77%) liewithin thenorthandeast sub-area,with theremaining15 in thesouthandwest. In land terms thespatialdistribution isquitedifferent,with54%(88ha)offloorspaceinthenorthandeast,and46%(76ha)inthesouthandwestsub-area23. This results from amuch larger average site size in the south andwest sub-area. Infloorspacetermsthesouthandwestareadominateswith59%oftotalfloorspaceinthedistrict.ThedominanceisparticularlynotableforB1aandB1cfloorspace.
Table5.2EmploymentLandandFloorspacebyUseClassandSub-Area
BUseClass NorthandEast SouthandWest Total
B1(a) 46,264 29% 112,316 71% 158,580
B1(b) 479 100% 0% 479
B1(c) 16,577 13% 114,150 87% 130,727
B2 42,375 62% 25,525 38% 67,899
B8 169,823 53% 148,900 47% 318,723
TotalFloorspace 275,517 41% 400,891 59% 676,408
TotalHectares 88 54% 76 46% 164
TotalNo.Sites 50 77% 15 23% 65
Source:HJAbasedonArupAnalysis
5.1.3 SupplybyQualityandCondition
Table5.3setsouttheresultsoftheassessmentoftheconditionofemploymentfloorspace. Morethan60%isratedasgood,30%asfairandlessthan10%aspoor.ThemajorityofB1a,B1candB8premises,whichaccountfornearly90%oftotalfloorspaceisratedgood.
When considered by sub-area, 70%of the 60,340 sqmof floorspace identified as poor quality islocatedinthenorthandeastsubarea.
23Table5.1(basedonTable7oftheArupsupplyreport)relatestoonly60ofthe65sites.Itexcludesfivesiteswhicharewhollyderelictorvacant.AsaresultthetotalquotedlandareasinthisparagraphdifferfromthetotalshowninTable5.1.
26
Table5.3EmploymentLandandFloorspacebyQualityandCondition
BUseClass Good Fair Poor TotalFloorspace(Sqm)
B1(a) 57% 42% 1% 158,580
B1(b) 0% 36% 64% 479
B1(c) 89% 10% 1% 130,727
B2 41% 52% 7% 67,899
B8 59% 28% 16% 318,723
Total 61% 30% 9% 676,408
NorthandWest 49% 32% 70% 275,517
SouthandEast 51% 68% 30% 40,891
Source:Arup(Table9)andHJA
5.1.4 Vacancy
The assessment of existing supply identified some 23,923 sq m of vacancy. This is below thebenchmark of 5%-8%of stock anticipated for frictional vacancy. This suggests very high levels ofoccupancyacrosstheDistrictwhichlimitsthecapacityforthemarkettooperateeffectivelyintermsofgrowthandmovement.Only20%ofsitesarereportedtohavevacantpremises
5.1.5 LossesofEmploymentSitesandPremises
TheArupassessmentconsideredrecentandpotential future lossesofemploymentsitesbasedonimplementedandextantplanningpermissions.
Over the last sevenyears theassessment identified the lossofmore than24.2haofemploymentlandonninesitesacrosstheDistrict,equivalentto3.5haperannum.
Afurthereightsiteswereidentifiedasatriskoflosingemploymentlandinthefutureasaresultofprior approvals and planning permissions. This could total a loss of 11.6 ha or 23,000 sq m offloorspace.
5.2 FuturePotentialEmploymentDevelopmentSites
TheArupassessmentsoughttoidentifyderelictland,underutilisedlandandpotentialextensionstoexistingemploymentsites.Thisidentifiedninepotentialexpansionsitesof50haofferingpotentialforaround220,000sqmofnewemploymentfloorspace.87%ofthispotentialexpansionlandisinthe north and east sub-area. In addition, eight sites with potential for regeneration andintensificationequivalenttomorethan21,000sqmwereidentified.93%ofthelandand72%ofthefloorspaceislocatedwithinthenorthandeastsub-area.Thedatashowfargreaterpotentialinthenorthandeastsub-area.
27
Afurther10siteswithpotentialfor67haofnewemploymentdevelopmentwereinitiallyidentifiedby Arup. These were assessed to have potential to deliver more than 310,000 sq m of newemploymentdevelopmentinaggregate.Thisincludesfivesitesineachsub-area.Inlandareaterms62% (42ha) is locatedwithin the north andwest sub-area,with the remaining 38% (26ha) in thesouthandwestsub-area.
Incombinationatotalof27opportunitysitestotallingapproximately132hawasidentified. Table5.4 indicates the spreadof opportunity byUse Class basedon the primary development scenarioassessedbyArup. This shows thatunder theprimarydevelopment scenario there is a significantpotentialsupplyofB1a/bandB8floorspacebutlimitedopportunityforB1c/B2accommodation.
18ofthe19neworexpansionsitesarelocatedwithintheGreenBelt.
Table5.4OpportunitiesforGrowth(Floorspacesqm)
Category B1a/b B1c/B2 B8 Total
Regenerationlanddevelopmentcapacity(primaryuse)
7,029 0 1,240 8,269
Intensificationlanddevelopmentcapacity(primaryuse)
0 840 12,000 12,840
Expansionlanddevelopmentcapacity(primaryuse)
9,840 0 209,920 219,760
Potentialfordevelopmentlandcapacity(primaryuse)
126,300 0 185,360 311,660
Total 143,169 840 408,520 552,529
Percentage 26% <1% 74% 100%
Source:Arup(Table13)
Furtheremploymentlandopportunities,inadditiontothosedescribedabove,havebeenidentifiedthrough theproposals setoutby sitepromotersof thedraft strategicallocationswithin the LocalPlan. This includes12-15hectaresatLattonPrioryandunspecifiedquantumsatWestSummers,WestKatherinesandEastofHarlow.
Itisnotsuggestedthatalltheabovesitesbeproposedforallocation,buttheycompriseaportfolioofpotentialopportunitysites,subjecttofurtherdeliverabilityassessmentandsiteselection.
28
6 FutureSpatialStrategyRecommendations
This chapter brings together the analysis from both the demand and supply side to shaperecommendations tohelpEFDCshape its future spatial strategy foremployment landprovision intheemergingEppingForestDistrictLocalPlan.
6.1 DemandSummary
The FEMA level assessment of future requirements has identified potential for jobs growth ofc10,800withintheEppingForestDistrictacrosstheentire2011-33planperiod.Thisincludedstronggrowthinjobsoverthe2011-16period,absorbingcapacityinthelabourmarket.TheoverallrateofjobsgrowthisforecasttobemoremodestovertheremainderoftheplanperiodintheDistrictasaresultofunderlyingeconomicexpectationsandasub-regionalpolicyfocustoconcentrategrowthatHarlow.
EmploymentgrowthacrosstheDistrict(andtheFEMA)willbespreadacrossallUseClassesaswellasasubstantialproportionnotrequiringsitesorpremises. IntermsoftherequirementforBUseClassemploymentsitesandpremisesarequirementforapproximately2–5hectaresofofficesitesand14hectaresofindustrial(manufacturingandlogistics)siteshasbeenidentified.Thisrelatestothe 2016-33 period. Requirements are shown to be fairly evenly spread across the plan period,althoughinrealitythedeliveryofnewfloorspaceisanticipatedtobe‘lumpy’andnonlinear.
Monitoringdatarelatingtorecenthistoryisbasedonplanningpermissionsratherthanfloorspaceorlandcompletions,thisislikelytooverstateactualdevelopmentactivity.Theavailabledataindicateslower levels of activity since 2009-10, with net losses of B Use Class floorspace permitted in the2011/12 – 2014/15 period. Prior to the economic downturn levels of permissions were muchgreater for both gains and losses of B Use Class floorspace. Discussion with local business andcommercial propertymarket stakeholders indicates two submarkets within the District, the firstrelates to theareawithinandaroundtheM25,broadly thesouthwestof theDistrictwhich formspartoftheouterLondonfringeandischaracterisedasmoreurban.Thesecondrelatestotheareaoutside theM25which is characterised asmore ruralwith smaller towns. Strong demand and ashortageofsupplyisreportedacrossthedistrict,particularlyforlocationswithstrongaccesstokeytransportinfrastructureroutes,M25,M11andCentralLine.Thisissupportedbywiderevidenceofrisingrentallevels. ConsulteesreportedlowvoidrateswhichisinkeepingwiththefindingsoftheArupsupplyreport.
Keydrivers relate to theaccessibilityof theDistrict, and thereare stronganecdotal indicationsofdemandarising frombusinessesdisplacedoutofLondonandservingLondonmarkets.Thismakesstrong access back to the capital a key feature of requirements. A strong start-upmarket is alsoreported,drivingrequirementsforbothstartupandgrowonspace.Bothgeneralandlocaltrendsarepointingtowardsstrongdemandforsmallerpremises,ratherthansignificantlylargefootplatesineithertheofficeorindustrialsectors.
The greatest barriers relate to site availability and viability, both are exacerbated by strongresidentialvalues.Thereisaclearsentimentacrossconsulteesthatthereisaneedfordeliverableemployment sites to meet demand. However, delivering the floorspace on such sites will be
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challenging. There is also a need to drive regeneration and redevelopment of poorer qualityindustrialareasandthereissomeevidenceofthishavingtakenplace.
6.2 SupplySummary
The Arup supply report has set out a profile of existing supply and future potential employmentopportunity.Atotalof160haofemploymentsitesiscurrentlyinusewithverylowvacancyreported(3.5%). B8storageanddistributionusesaccount formorethanhalfofsupply,B1aoffices for justover20%andB1clightindustrialforjustunder20%.B2generalindustrialpremisesaccountforlessthan10%ofexistingsupply.
The assessment of quality found the majority (61%) rated good and 30% fair. Only a smallproportion(9%)isreportedaspoor.Thisdoesnotfullyaccordwiththeviewsofcommercialmarketstakeholderswhoindicatedaneedtoupgradestockstomeetmodernoccupierrequirements.Thisalso included a need to ensure sites include the appropriatemix of support and complementaryservicesattractivetomodernoccupiersandworkers.
Assessmentofrecentandextantplanningpermissionsindicatedlossesofaround3.4haperannumofemploymentlandoverthelastsevenyears.
77%ofexistingemploymentsitesarelocatedinthenorthandwestsub-area,however,only54%ofthetotalsiteareaislocatedinthenorthandwest.
19potentialexpansionornewemploymentsiteshavebeenidentified,alongsidefourdraftstrategicallocationswhichcouldprovideemploymentcapacity.Intotalthesesitescomprisemorethan130hectares,well in excess of future requirements. These are primarily suited toB1aoffice andB8storage and distribution uses, with limited potential for B1c/B2 light and general industrial uses.These are concentrated in the north and west sub-area, to a much greater extent than existingsupplyby landarea.18ofthe19potentialexpansionornewemploymentsitesare locatedwithintheGreenbelt.
6.3 Recommendations
Drawing together the demand and supply evidence the following recommendations for futurespatialstrategyemerge:
• Constraints,particularlytheGreenBeltanddevelopmentviability,placeapriorityontheprotection,intensification and refurbishment/redevelopment of existing sites where possible. EFDC shouldconsiderwhat it can dowith sites in its own ownership to facilitate upgrading of supply tomeetmodernoccupierrequirements.TheArupsupplyreportsuggestslimitedscopeforintensificationorregenerationofexistingsiteswiththepotentialtorealisearound21,000sqmwithineightexistingemploymentsites.Morebroadly,Arup’ssiteresearchconcludesexistingemploymentsitesarewellusedandshouldbedesignatedintheemergingLocalPlantoenhancetheirprotection.
• In linewith the NPPF there is a need to ensure sufficient flexibility in any strategy to respond tounforeseendemands.Thiswillmeanofferingrangeandchoiceintermsoftypology,location,mixandtimingofallocatedsupply.
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• Theanalysisindicatesarequirementinthefirstfiveyears2016-21of6-7ha,however,thisisbasedonreplacementrequirementsbeingevenlydistributedthroughtheplanperiod.Inrealitythepatternofactivitywill be farmore lumpyandmay require further strengtheningof thedevelopmentmarketbeforesignificantnewdevelopmentcomesforward.Particularlygivencurrentviabilitychallenges.
• FuturespatialstrategyneedstorecognisethetwobroadmarketareaswithintheDistrictandallocatewithineachofthese.Thesupplyassessmentindicatesmuchgreaterpotentialwithinthenorthandwestsub-area,particularlywhencomparedtothedistributionofexistingemploymentland.
• The evidence is clear that strong accessibility is the critical driver, including access into Londonmarkets.LocationswithstrongaccesstotheM25,M11andCentralLineshouldbeapriority.
• The existing typology of the District commercial employment market is around B1a, B1c and B8premises. The District is not a strong manufacturing location. The B1a Use Class is forecast toexperiencethegreatestnetadditionalemploymentgrowth.Notwithstanding,theneedtomaintainmodernstockswilldrivereplacementdemand.Asaresultthereisaneedforflexibilityinprovisionand a spread of industrial sites that suit both B8 and B1c/B2 activities. The supply assessmentindicatedastrongofferofsitessuitedtoB8withlimitedcapacityforB1c/B2whichwillneedtobeaddressed.
• Siteswillneedtobesuitedtomeetingatrendtowardssmallerpremises,includingastrongstartupandgrowonmarket.
• ThereisnoevidencethattheDistrictcurrentlyservesawiderHarlowmarketareaandnoevidenceemerged from the 2015 or 2017 FEMA studies indicating that there is a need to meet Harlowrequirementsor serve theHarlowmarket. There is thereforenoclear requirement for the spatialstrategytoaddressthis.
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Appendix1:Consultees
Thefollowingindividualswereinterviewed:
• RichardBailey,EssexCC• SimonBeeton,DerrickWadeWaters• RobertEdge,InvestinEssex• RogerHayward,FennWright• KarimPabanai,EppingForestDistrictCouncil(Estates)• GrantRichardson,GTComms• AdamWalker,Grangewood• KirstineWatkins,MullucksWells
WrittenrepresentationwasmadebyEppingForestChamberofCommerce
A workshop was held with the following attendees (in addition to relevant EFDC Officers andMembers):
• RobertEdge,InvestinEssex• StuartHardisty,HJA• TriciaMoxey,EppingForestChamberofCommerce• JohnPrice,EppingForestChamberofCommerce• GrantRichardson,GTComms• AdamWalker,Grangewood• KirstineWatkins,MullucksWells
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Appendix2:HeadlineMarketTrends
The followinganalysisprovidesa summaryof latest researchon changingpropertymarket trendswithinthecoreemploymentpropertysectors.
Offices
Officespace in theUKmarketcanbecategorisedasurbancore24,peripheral25,andout-of-town26.Current and future trends in these categories are discussed below, followed by concludingcomments.
UrbanCore
Developmentsinrecentyearshaveseenamarketshifttowardsurbancoreofficespace.JonesLangLaSalle (2013) suggest six drivers of this trend: demographics; immigration and globalisation;workingpractices;sustainability;policy;andtransportimprovements.Adiscussionofthesedriversispresentedbelow.
Demographics
Withmovementoflabournowmoreprevalentthanever,businessesarepayingcloserattentiontothe wellbeing of their staff in order to retain their most talented employees. Given the shift inlifestyle preferences towards a desire for proximity to services, amenities, and leisure facilities,urbanlivinghasbecomemoreattractive(especiallytoyoungpeople).Similarly,internationaltalentismost likely to be concentrated in urban areas.Many businesses have taken the opportunity torelocatetocity-centresinordertocompeteforthetoptalentintheirsector(NLP,2015).
Workingpractices
Reduceddeskspacerequirementshavefacilitatedamovetowardsurbancoreofficespace,broughtabout by technological advancements (improved broadband connectivity and smaller personalcomputers), and a rise in hot-desking and remoteworking as established and accepted norms inprofessionalsectors(NLP,2015).Upto14%oftheUK’sworkingpopulationworkfromhome,withthisproportiongrowingatarateof1.2%p.a.,withtheproportionincreasingto17%ofworkers inthe South West (ONS, 2014). The rise in self-employed workers in professional sectors has alsocontributedtoareductioninoverallofficespacerequirements.
Averageofficedensity increasedfrom15sqmperemployeeto10sqmbetween2005-2015(LSH,2015), with densities of up to 8 sq m nowadays becoming commonplace in many offices (Dady,2016). Alongwith reducingworkspace requirements, this can be attributed to the trend towardscity-centrerelocation,alongsidethefactthatoffice-basedjobgrowthhasoutpacedgrowthinofficefloorspace over the same period (NLP, 2015), both of which havemade higher office densities anecessity. It is expected that this recent increase in densities will plateau, as densities can onlyincreasesofar(BCO,2013).BCOresearchdatasuggeststhatthislevelling-outisalreadybeginningtohappen. If this is true, this would reduce the need to future-proof developments against furtherincreasesindensities.TheBCOalsoreportedanecdotalevidencetosuggestthatinsomeinstances,24Centralofficemarketareaswithhighlevelsofemploymentdensity.25Edgeoftownandsuburbanemploymentcentres,officesinterspersedwithresidentialareas.26Largeout-of-townbusinessparksandscienceparkslocatedontheedgeofurbansettlements.
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densities will continue to rise. This could be made possible by improving design standards as aresponsetoapushtowardsreducingconstructioncostsandenvironmentalconcerns.
Sustainability
Themovetowardsmoresustainablelivingmeansthatthewalking,cycling,andpublictransportationopportunities provided by urban core locations plays a role in office developments. Continualimprovements incity-centrepublictransport infrastructure,suchastramlines,train lines,andbusroutesaremakingcity-centresmoreaccessible.This,combinedwithadeclineincarownership,hascontributedtotheshifttowardsurbancoreofficemarkets(NLP,2015).
Policy
PolicyinitiativessuchasEnterpriseZones,CityDeals,andTownCentresFirsthavecontributedtotheshifttowardsurbancoreofficespace.
PermittedDevelopmentRights(PDRs)allowthechangeofofficespacetoresidentialusewithouttheneed for full planningpermission. PDRshave thepotential to lead to adeficit in office space andincreasepressureonofficemarkets.Theavailabilityofcommercialpropertyhasbeendecliningatitsfastestratesince1998sincetheintroductionofPDRs(RICS,2014).However,insomelocations,thepolicy is allowing the removal of poor quality office space, which is increasing rental values andmakingnewdevelopmentmoreviable.
Policies influencedbyagglomerationtheoryarealsoencouragingashift towardsurbancoreofficespace.Thistheorysuggeststhatbusinessesbenefitfrombeingco-locatedwithsimilarfirms,notonlybecause of the concentration of labour which results, but also due to the sharing of ideas, bestpractice,andassociatedsupplychainadvantages(JLL,2013).
Potentialproblems
Developablelandishardertocomebyincity-centresduetotheinterrelatedeffectsofconstrainedplanning regulation, high development costs, and higher physical constraint due to existinginfrastructureandbuildings (JLL,2013).There isalsoa risk thatconcentration inurbancoreareaswillcreatearentbubble.
Periphery
Good access to the urban core provided via improving public transport links make peripherylocations a promising alternative to urban core areas. The strengthening of urban core areas asbusinesscentres,and the inevitable rising rents in thoseareas,willensureamarket forperipheryoffice spaces. With better land availability, the increasing popularity of mixed-use developmentsmakes periphery office space a viable option. This land availability also provides increasedopportunitiesfor‘futureproofing’developments,ensuringflexibilitytochangecapacityinordertomeettheneedsofachangingeconomy,andcapitaliseoncity-centrespillover(JLL,2014b).Thereispredictedtobean improvedperformancefromperipheralofficemarketsoverthenext fiveyears,withhigheryieldsencouraginginvestmentatacomparativediscountcomparedtourbancoreareas.
Out-of-town
Despitethetrendtowardsurbancorerelocation,occupierdemandforout-of-townofficespacehasremained steady, and there is no evidence of a decline in demand for business park space (JLL,
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2014b). Theyoffer the large, flexible floorplates thatmore central locations can’t always provide,and space to expand, which is also more problematic in urban centres. Their connectivity tomotorwaysandairportsarealsoattractive,particularlyforsalesfirms(JLL,2014b).
However,duetoalackofproximitytourbanareas,out-of-townmarketsarefindingit increasinglychallengingtoattractoccupiersbyprovidingtheworkingenvironmentthatachangingworkforceislookingfor.Asaninvestmentopportunity,newout-of-townofficedevelopmentsongreenfieldlandareseenastooexpensive.Highupfrontinfrastructurecostsandtightercarparkingrestrictionsmeanthatnewout-of-townofficedevelopments areon thewane (Dady, 2016). TheTownCentres Firstpolicyhasalsomadeobtainingplanningconsentforout-of-townschemesmoredifficult.
Thegeneraltrendforout-of-townofficespaceismovingtowardsrecyclingandretrofittingexistingbusinessparks,movingawayfromcampus-stylebuildings to increaseddensities,multi-letting,andvibrantpublicspacesinanattempttomirrorurbanconditions.
Conclusions
Despite the reduction in averageoffice space per employee, and the increase in flexibleworking,business behaviour still reflects the importance of office space in encouraging interaction,networkingandcollaboration (NLP,2015).Prevailingmarketconditionsgenerally support theUK’sofficemarket,duetotheimportanceoftheservicessectortoeconomicgrowthandit’scontributiontojobcreation(LSH,2016).
Furthermore, even though office densification is on the increase, this doesn’t necessarily lead tosmalleroverallfloorplates.Smallerworkspacesareinmanycasesoffsetbymeetingspacesandon-siteprovisionofcafés,gyms,crèchesandotherfacilities.
Sectoralgrowthwillalsoplayanimportantroleintheprovisionofofficespace.Employmentgrowthin the UK is primarily driven by the knowledge economy, with differing office space needs fromsector to sector. Media and technology companies tend to value combinations of dedicatedworkspacesandcollaborativeareas,whereasmanybusinessesinprofessionalservicessectorspreferamoretraditional,formalworkspaceswithlargefloorplates(NLP,2015).
Flexibility of covenant will be important for emerging businesses, whilst established firms cancommittothelong-termcovenantsdesiredbyinvestors.
Essentially,demandforofficespaceintheUKisnot indecline,butthereisanongoingshift intheareasthatbusinessesarechoosingtolocatethemselves,andthewaytheychoosetousethatspace.
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Industrial&Manufacturing
“The general trend is towards smaller,manageable, clean,well-organised, highly flexible factoriesthatcontainupdatedbuttraditionaltechnologiesthatcanbequicklyrampeduptomeetvolumeandchangingmarketrequirements.Customerfocusandpersonalisationofproductisrecognisedasbeingof increasing importanceand it isclear that in the longer termtherewillbeaneed forcentralisedmassproductionfacilitiesandlocalisedfacilitiestopersonalisetheproduct.”
Thefactoryofthefuture,OfficeforScience
GeneralOutlookfortheUKManufacturingSector
Overthelast30years,themanufacturingsectorintheUKhasbeeninrelativedecline.Duringthisperiod, output in the manufacturing sector has grown more slowly than output in the servicessector.Thenumberofpeopleemployedinmanufacturinghasalsofallensteadilyasproductivityperemployeehasincreased(PwC,2009).Britain’snegativebalanceoftrade(moregoodsimportedthanexported)hashadanegative impacton thesector,and isunsustainable ifUKmanufacturing is tosucceedinthefuture.
WiththepopulationoftheUKasaproportionofglobalpopulationfalling,andemergingeconomiesclaiminganincreasinglyproportionateshareofglobalmarkets,Britain’srelativeeconomicinfluencewillcontinuetoadjustaccordingly.
Thisadjustmentprocesswillbeaidedbytherepatriationofproductionfrom lowcost locationsasthe UK becomes amore cost-competitive location formanufacturing. This will encourage furtherinvestmentinonshoremanufacturingcapital.
TheUK’s cost-competitivenesswill alsobe impactedby the conflictingdemandspresentedby theglobalsupplychain.Ontheonehand,somebusinessesdesireaglobalsupplychaintosupporttheirinternational operations. Meanwhile, there is an emerging move towards clustered local supplychainswhich support the sharing of resources (including knowledge). This latter trend, combinedwith higher labour costs and rising transport costs, will encourage the onshore sourcing ofcomponentsandresources.ThismovetowardsmorelocalisedsupplychainswillmakeitincreasinglypossiblefortheUKtocompeteonthegroundsofcost,quality,deliveryspeed,andcustomisation,whicharebecomingincreasinglyimportant(GoS,2013a).
Inordertothrive inthesenewmarketconditions,theBritishmanufacturingsectormustcapitaliseonitsareasofcompetitiveadvantageandcontinuetoestablishitselfasa‘nicheplayer’(PwC,2009).Thestrongestmanufacturing industries in theUKareaerospace,automotive,andpharmaceuticals(GoS,2013b).
AlthoughitispredictedthatmanufacturingemploymentintheUKwilldeclinebyaround170,000to2020, therewillbe800,000 jobs to fill in the sameperiodaspeople leavemanufacturing throughretirementandcareerchanges(GoS,2013b).Furthermore,thehistoricfallinemploymenthasbeenoffsetbysignificantproductivitygainsinUKmanufacturing.
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TechnologicalAdvancements
Technological advancements have changed, and will continue to influence, the way themanufacturing industry behaves. Increased connectivity ismaking it possible to reduce costs andboost productivity through the development of ‘smart factories’27. Similar to the office propertymarket,connectivityismakingremoteoperationsmorepossibleinmanufacturing(PinsentMasons,2015).Theresultantdecentralisationofmanufacturingpremisesisdiscussedinthenextsection.
Connectivity is also facilitating theproductionof connectedgoods.Although it isdifficult toknowwhatdirectimpactthiswillhaveonpropertyrequirements,anincreaseintheneedfordatastoragetomeetthefunctionalrequirementsofconnectedproductsmeansacontinuedincreaseinthedatastoragepropertymarketwillbenecessary.OnespecificproductsetwhichcouldhaveasignificantimpactontheUKmanufacturingsectoristhatofconnectedandautonomousvehicles.Thefurtherrolloutof this technologycouldcreateanadditional320,000 jobs in theUK (GoS,2013b),withaninevitableimpactonthemanufacturingandindustrialpropertymarket.
Theprevalenceof3Dprintingwillcontinuetochangethefaceofmanufacturing.Thenumberof3Dprinters soldwill reach2.3millionby2018 (PinsentMasons,2015),with theglobalmarket for3Dprintedproductsgrowingfrom£2bnto£70bnperyearby2020(PinsentMasons,2015).
PossibleImpactsontheManufacturingandIndustrialPropertyMarket
Theabovemarkettrendsandtechnologicaladvancementshaveimplicationsforthemanufacturingand industrialpropertymarket.Theseongoingchangesare resulting innew industrieswhichhavedifferentpropertyneedstotraditionaloccupiers.Asaresult, therewillbean increasingmismatchbetween supply and demand of premises, with many older sites becoming economically andfunctionally obsolete (DTZ, 2009).Market conditions are already such that rents for floorspace inolder,moregeneralindustrialestateshavefallenaslowas£1persqft.Thesesubduedvaluesarearesultoftheageandconditionofstock,aswellastheextentofvacantpremises,whichdiscouragesfurtherspeculativedevelopmentofnon-specialistsites.However,itseemsthatwhatevertheoverallprospectsforUKmanufacturing,therewillcontinuetobeademandforappropriatefacilitieswhichmeetchangingmodernoperationalrequirements.
The trend towards localisedoperationswill be facilitatedby the technological advancements thatare emerging. The factories of the futurewill bemore varied andmoredistributed than thoseoftoday.Thereisgeneralconsensusthatthemanufacturingandindustrialpropertymarketwilltrendtowards smaller local and urban sites, with mobile and domestic ‘factories’ becoming moreprevalentaswell.Thiswillallowfor increasingsupplychain integration,whichwillalso impactthemanufacturingpropertymarket.Productsdependentonprocess-driveninnovationbenefitfromtheco-location of different parts of their production systems, which may lead to clustered hubs.Althoughlargesitesaresettobecomelessprevalent,thereisscopefora‘hubandsatellite’model,with large,centralisedpremisessupplementingaproliferationofsmaller,decentralisedones(GoS,2013a).
27‘Smartfactories’havethepotentialtoboostUKmanufacturingproductivitybyupto30%(PinsentMasons,2015).
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Thetrendtowardssmallerpremiseswillbefurtherpromptedbyadrivetowardssustainability,withtheneedtomakeefficientuseoflandbecomingevermoreimportant.Advancementsinautomationandroboticswillalsoreducethefootprintofsites(GoS,2013a).
Theneed for these smallerdecentralised sites tobe flexibleand reconfigurablemay requirea re-categorisationoflanduse.Businessesarelikelytodesirelessspaceforproductionandmorespaceforofferingaccesstocustomers,clients,suppliers,universities,andotherbodiesi.e.non-industrialuses.Thistrendwillcreateademandforpremisesthatareattractiveplacesinwhichtowork.
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Distribution&Logistics
Recent research suggests there are someemerging trends in thedistribution and logisticsmarketthatwill influence thepropertymarket over the coming years. This report discusses those trendsandtheirlikelyimpacts.
IncreasedOnlineRetailing
TheUK is theglobal leader foronlineconsumerspending,witharound15%of salesmadevia theInternet (Colliers, 2015). It is expected this figure will rise to 20-25% by 2020 (Page, 2013). Thiscontinuedriseinretaildemandhasfuelledgrowthinlargedistributioncentres,atrendwhichissetto continue as ecommerce increases its market share. Increasingly, companies that have a goodapproach to ecommerce are receiving better covenant strength in their lease arrangements,withinvestorskeentosupportpropertyventuresintheonlineretailingmarket.
Online grocery shopping in particular is set to be the primary driver of an increased demand forlogistics assets and infrastructure. Despite the UK’s mature online retail market, online groceryshopping accounts for only 4.4% of total grocery spending (JLL, 2014a). This is set to change asretailers increasetheirprovisionofonlinegroceryshoppingandadapt theirdistributionmodels inthefaceofrisingdemand.Thetraditionalmodelofin-storepickingisbecomingunsustainableduetoits increasing disruptiveness, with supermarkets utilising ‘dark stores28’ instead. This growth willgeneratenewrequirementsforlogisticsfacilities.
ChangingSupplyChainModels
The increase in online retailwill change the supply chainmodels adopted in the distribution andlogistics market. The market is changing from a ‘business-to-business’ model to a ‘business-to-customer’one.
Businesses are focusingmore on ‘first-mile’ and ‘last-mile’ logistics29, as distribution is becomingmorecomplexunderthisnew‘business-to-customer’model.
Strategic Rail Freight Interchanges (SRFIs) are a response to changing ‘first-mile’ demands. SFRIscreate direct employment opportunities, reduce the need for HGV transport30, and play animportant role in serving regionalmarkets. They create increased on-site land requirements, anddifferingoff-siteinfrastructurerequirements(DfT,2011).
Onetrendwhichwillchangepropertyrequirementsinthenearfutureistheincreasedprevalenceof‘click-and-collect’ services. This model is a response to changing ‘last-mile’ logistical demands. Itreducesdistribution costs for retailers, and is often seenasmore convenient for the customer asitems can be collected at their discretion.Whether businesses choose collection in-store or at adedicated location (e.g. Amazon Locker), this model will require more floorspace closer to thecustomer.
28Distributionwarehousesclosedtothepublicwhichfocusononlineordersonly29Asarule,theshipmentofagoodbeginswiththeso-called‘first-mile’andendswiththe‘last-mile’.30AndconsequentlyreducetheimpactofHGVlogisticsonanalreadycongestedroadnetwork.
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Another‘last-mile’distributionmodelbeingexploredbyretailersistheuseofdrones,orUnmannedAerialVehicles(UAVs).Currentusageofthistechnologyisstillinitsinfancy,buttherearereasonstobelieve itwillbecomemoreprevalent.Withfuelpricesposingoneofthebiggestfuturethreatstothe logistics industry,UAVsmayprovidecostsavings inthe longterm.UAVdistributioncouldalsoprovide relief for urban traffic networks, reducing congestion whilst maintaining delivery times.However, in the near future it is unlikely that UAVs will be used for anything more than smallpackagedistribution(Marsh,2015).
PossibleImpactsontheDistributionandLogisticsPropertyMarket
Theaboveshiftsinsupplychainmodelswillhaveanimpactonthelandandpropertyrequirementsofthedistributionandlogisticssector.
Thechangesin‘last-mile’logisticswillalmostcertainlyplaceincreaseddemandforsmaller,localiseddistribution centres either on the periphery of towns and cities, or located within urban areas,especially in and around London (Colliers, 2015). Demand for more traditional, large distributioncentreswitharegionalfocuswillbemaintainedinordertosupportanetworkofsmaller,localunits.Asaccessto land inandaroundUKcitiestightens, ‘skyscrapersheds’maybecomemorecommon.Multi-storeywarehouses alreadyexist in land-scarce locations such asHongKong, Singapore, andJapan31. Inmetropolitan centreswithpremium land costs andavailability, suchdevelopmentswillenablelogisticsfirmstolocatethemselvesclosertowherethemajorityofonlineconsumersreside,reducingthetime,cost,andcarbonfootprintoftheirdistributionnetworks.
If UAV distribution becomes popularised, this will further necessitate a move towards smaller,localiseddistributioncentreswhichcanserviceurbanareas.
For out-of-town office space that cannot be developed for residential use under PermittedDevelopmentRights, subject to gainingplanningpermission theremaybe scope for suchunits toserveamorelocalisedapproachtodistribution.
Conclusions
Distribution and logistics make up a large proportion of transport greenhouse gas emissions.Significant reductions in emissions will be required tomeet the UK’s climate change targets andcarbonbudgets(DfT,2011).Despitethispressureontheindustry,itlookssettoexperiencegrowthoverthecomingyearsasaresultofincreasingecommercesalesandthedemandthiswillcreatefornew supply chain models. In particular, the need for large, regional distribution centres will bemaintainedinordertosupportthedevelopmentofsmaller,localunitslocatedonurbanperipheriesthatwillmeetthegrowingdemandsofonlineconsumers.
31 Research suggests that plot ratios of 80%-950% have been achieved in Asianmulti-storey warehouse developments(CBRE,2016).ThisfigureshouldbetreatedwithcautionasGFAismeasureddifferentlyaroundtheworld.Furthermore,UKparkingrequirementswouldlikelyrestricttheachievableGFA.
