London’s industrial land market: Squeeze on space
London’s industrial land is under pressure. In the last 20 years, the city released almost six million square metres, about 23 per cent of total industrial space. At the same time demand for industrial land did not fall, 1 so the competition for industrial premises in the capital has intensified. Vacancy rates, which stood at 16 per cent in 2001, are now around four per cent across the city 2 – a lower vacancy rate than for office space 3.
Increased competition for industrial premises has led to a steep rise in rental prices and land values. Of course, there is a huge range of occupiers on London’s industrial land market and their requirements vary, and so vacancy rates and land values are highly segmented. Generally, land value pressures have been felt most intensely in central and inner London where demand has been strongest and where a greater proportion of industrial land has been released. In some areas the increase in industrial land values has been astounding: in 2020, land values in Park Royal were as high as £7 million per acre, up from an average of £2.5 million in 2017. 4 And according to forecasts, the rise in industrial land values is set to continue at pace: over the next five years, London and the wider South East region could see a 50 per cent increase in its industrial rental values. 5
Rising prices and increasingly constrained supply of industrial land make it difficult for smaller and emerging businesses to compete with sectors willing to pay higher land costs for central locations. 52 per cent of businesses surveyed by the Federation of Small Businesses in 2018 maintained that in five years’ time, they didn’t expect to be in the same London locations due to issues around affordability and availability of space. 6 Moreover, the lack of affordable space also prevents businesses from being able to expand into larger and more suitable sites as their operations grow, again leading to the displacement of certain activities. 7 For businesses that have had to relocate and still require access to London markets, this can lead to higher carbon emissions and traffic congestion – we explore this later in the paper. Those businesses that remain are often having to deal with ageing premises, since rent increases are driven by the scarcity of available space, rather than landlords investing in the quality of facilities.
The rise in industrial land values has been such that in some London areas, industrial land values have surged past residential land values, according anecdotal evidence presented to the Commission. While high industrial land values can slow down the loss industrial premises overall, only higher value industrial uses stand to benefit – such as logistics sheds or data centres. Other uses that cannot afford higher rents, such as small makerspaces or workshops, would continue to be priced out of the city.
The land of 1,001 activities
London’s industrial land hosts a huge diversity of activities. At a time when some of London’s industrial heritage building have been converted into spaces for national art galleries or expensive homes, it would be easy to think of the city’s industry as a relic of the past. However, London still relies on critical industrial infrastructure to function and support the daily lives of its residents and businesses. These range from waste disposal sites and water storage, to the warehouses that ensure that our homes, businesses and shops are supplied with the goods we need.
Until as late as the 20th century, London was a major centre for manufacturing and maritime trade. Though heavy industry began to leave the capital in the 1960s and 70s, London still retained a diverse network of industrial activities and sites. Some of these are more ‘traditional’ types of industry – such as food factories, wholesale food suppliers, steel refineries, motor repair, and storage for aggregates and construction materials. However the activities that take place on industrial sites are wide ranging and also include, but are not limited to, film production, servicing and repairs, recycling and distribution.
As the city’s economy evolves, many traditional forms of industry have changed or given way to other types of operations that take place on industrial sites. Large-scale manufacturing is now the exception rather than the rule. Newer activities are emerging such as last-mile consolidation centres and dark kitchens, serving the growing consumer demand for ultra-convenient food and goods deliveries. And increasingly critical infrastructure such as data centres reflect how practically all jobs have become digitally enabled.
Nonetheless, despite the evolution of some industrial activities, the perception of industry as heavy, dirty, and smelly remains in the public imagination.
The nature of certain industrial activities does mean that they require specific types of industrial sites that are also strategically located to operate successfully. For example, large scale manufacturing and logistics operations need servicing areas, loading bays, yard space, access roads and holding areas for vehicles ranging from heavy goods vehicles to electric vans. Some activities need to operate around the clock, making them more ‘difficult’ neighbours to locate near homes, and resulting in them being hidden from view in strategic industrial locations.
But other industrial operations are easier neighbours to accommodate and are not necessarily cordoned off away from residents and town centres. Many, such as printers, bakeries, motor repairs and laundries, are nestled into the city’s high streets and residential areas. For example, within London’s ‘Maker Mile’ district, which includes Hackney and Tower Hamlets, manufacturing and making has become embedded into a mainly residential and commercial area because the processes of these businesses are mostly non-polluting and quiet. Proximity to one another and to the local community has allowed local manufacturers to diversify their activities and blur the line between manufacturing, sales, design and training. 8
Public perception and business voice
Despite its crucial role, activities happening on industrial land are not always well understood and receive relatively little attention. Many industrial activities, from waste management to the delivery of goods and services, do their job so efficiently that Londoners scarcely notice them happening.
Additionally, some of the newer activities that take place on industrial estates, such as coffee roasting or dark kitchens, may be less recognisable as industry, therefore leading to a misunderstanding of the sector, and a lack of public support.
This misunderstanding is experienced not just by the public but also by some development professionals and decision makers, who may not be aware of the changes and new trends in the sector. 2 According to a leading expert on industrial land, while the new use classes have introduced more flexibility, their ambiguity poses a new challenge for planning officers around how to define industrial uses that don’t fit neatly into existing use class orders.
Within individual sectors, there are organisations that speak on behalf of and build visibility for their respective industries. Such organisations are more common at a national level, with examples such as Logistics UK which represents the interests of all logistics and buyers of freight services. At the London level, networks such as the UKFT London Manufacturers have sought to bring together fashion manufacturers and address the common issues that threaten their stability and growth as well as create employment in disadvantaged areas. 10
There also are organisations that lobby on behalf of all businesses – for example the London Chamber of Commerce and Industry is important in providing a voice for a range of businesses of all sectors and sizes and has contributed to processes such as the Examination in Public for the London Plan.
However, according to a team member we spoke with, they are rarely proactively asked about issues around industrial land.
In 2017 the Greater London Authority created the Industrial and Logistics Sounding Board, a coalition of occupiers, business representatives, academics, and planning and property experts to independently scrutinise and respond to the Draft London Plan’s policies on industrial land. A member of the Sounding Board we interviewed said the Board acted as an important starting point for building a collective voice across different stakeholders who use industrial land and ought to have a continuing role – the Board was last active in 2018.
Currently, no coalition exists to speaks exclusively on behalf of all industrial land users in London. The diversity of industrial activities, and the fact that the majority of industry is made up of micro and small and medium enterprises may present a challenge to the building of such a coalition.