The Greater London Authority and some London boroughs are considering implementing an “Affordable Workspace” policy. This is similar to affordable housing policies, where developments will need to provide a certain amount of workspace for small businesses, particularly focussed on creative industries and start-ups. The aim is to increase economic diversity and foster innovation.
To date, implementation has been inconsistent as the policy proposals are still in their early stages, but Sadiq Khan has expressed strong support for it, particularly in boroughs on the fringes of central London.
London is lacking in affordable workspace for small businesses. Workspace generally has come under increasing strain due to increased house prices and a policy of permitted development from office use to residential. The majority of new office development in London is aimed at large corporate clients and small businesses are often priced-out of the market entirely.
Broadly, the suggestion is that the planning policy to implement affordable workspace for small and medium sized enterprises should be as follows:
- Limiting conversion of office space to residential space through permitted development;
- Encouraging provision of affordable workspace through planning policy;
- Ensuring new residential developments include non-residential space for small businesses; and
- Seeking funding and partnerships to create workspace for small businesses.
Councils have been keen to stress that there should not be a ‘one size fits all’ policy. It is not clear how the Greater London Authority will implement this, though it appears that there is some direct funding available from the Greater London Authority to incentivise particular developments. The policy is likely to form part of the Mayor’s new London Plan, which is due to be submitted to formal consultation in Autumn 2017.
Whether the strategy becomes part of the London Plan will be key, as the plan provides the 33 boroughs with an overarching framework for their local plans, helping them to tackle strategic as well as local issues effectively. Perhaps more importantly, legally, all of the boroughs local plans have to be in ‘general conformity’ with the London Plan.
Despite strong support from small businesses, there is opposition from developers. With property in London at a premium, there are concerns that the policy will significantly impact profits, with some estimates suggesting a 20% reduction. There are also concerns that the policy would push up rent in order to compensate for the subsidy together with concerns over a lack of clarity and specifics on the policy.
What approach is being taken by London Boroughs now?
The Mayor is asking all London boroughs to support the affordable workspace initiative and is encouraging them to sign the workspace pledge.
In the meantime, some London boroughs are already promoting affordable workspace. For example, Hackney is now stipulating that 10% of new space has to be let at a discounted rent and is considering making this part of their planning policy for all office schemes up to 2033. Islington also has a requirement that affordable workspace should amount to 5% of the total amount of proposed employment floor space for some developments.
It is clear that the Mayor and the General London Authority want to try to redress the imbalance of affordable workspace for small and medium sized businesses in and around London. They have recognised that there has been a shift away from this in recent years with various policies which have hit this sector. Although there has been some opposition to the proposed policy, increasingly recognition is being given to the importance of these businesses to the economy.
If you would like to discuss the information included above, please contact solicitor, Oliver Butler from our Commercial Property & Development team on 01892 701243.