Where is ‘affordable’ workspace?

Looking Beyond London

 

 

This blog post, which is the fourth in our five-part series on affordable workspace, focuses on where ‘affordable’ space is located. It builds on our first three posts, which set out what affordable workspace is, why it is important and what locations are most suitable, and sets up our final article which considers how affordable workspace can be physically configured to better meet occupier and operator needs.

Broad base

‘Affordable’ or ‘accessible’ workspace that aligns with the definition set out in our first blog post can be found across the UK from Inverness to Plymouth. These spaces typically offer discounted rents to occupiers, or other features that reduce the cost burden for freelancers, entrepreneurs, start-ups and small. Example spaces include:

• We Are Super, Weston-super-Mare (Meanwhile Space): A new community of start-ups, freelancers and small businesses located within a shopping centre in Weston-super-Mare town centre.
• The Enterprise Hub, Wrexham (Town Square Space): A convening space for businesses and the community to come together in a creative and collaborative environment to build a group of entrepreneurs in Wrexham Town Centre.
• Toffee Factory, Newcastle (Creative Space Management): A carefully refurbished building providing high quality, contemporary flexible space for a range of digital and creative businesses, from start-ups in a shared workspace to larger offices for established companies.

As set out in our second blog post, these spaces are generally managed by specialist ‘affordable’ or ‘accessible’ workspace operators, like Meanwhile Space, Town Square Spaces and 3Space, who have opened them in a diverse range of ways – some have done it independently, some have activated public sector assets, and some have entered joint venture partnerships with public and private sector bodies. It is also not uncommon to find community or third sector organisations running these types of spaces across the country.

Local authorities and other economic development bodies across the country (i.e. Local Enterprise Partnerships) are increasingly recognising the value of ‘affordable’ workspace as strategic investments into the future of areas, as highlighted in our third blog post, and are looking to provide such spaces in their areas to support economic growth and innovation - Manchester City Council, for example, recently secured £19.8m from the Levelling Up Fund to provide affordable technology and creative workspace in under-developed parts of its City Centre.

Place policy

However, the city with the most specific and well-developed ‘affordable’ workspace planning policies is London – reflecting the rapid rise in commercial real estate rents across the city over the past two decades. In the London Plan (2021) the Greater London Authority (GLA) set out an expectation for “[London] boroughs, in their Development Plans,… [to] consider detailed affordable workspace policies” (p.245).

In response to this many boroughs are currently drafting and adopting ‘affordable’ workspace policies, though a few, such as Brent, Camden and Hackney have had them for some time. As set out in our first blog these policies typically focus on securing space through Section 106 agreements as part of new commercial developments above specified size thresholds.

As the map below illustrates our analysis shows that 16 of the 32 London Boroughs have adopted policies and 11 have emerging policies or guidance. The only boroughs without existing or emerging policies at this time are the Outer London Boroughs of Bexley, Greenwich, Croydon, Merton, Sutton, Ealing and Harrow.

London’s Affordable Workspace Policies

Alongside these policies, many London boroughs have specific programmes and approaches to delivering ‘affordable’ workspace given the widely understood benefits they bring for local enterprises and places (as identified in our second blog post). Example initiatives include:

• Workspace Fund (London Borough of Lambeth): Lambeth have set up an £8m by-application loan and grant fund to help affordable and supportive workspace providers open more space across the borough.
• Public Sector Land (London Borough of Haringey): Haringey have leased an underutilised car park in Wood Green Town Centre to Meanwhile Space to deliver Blue House Yard – a temporary, architect-designed hub for local creatives, entrepreneurs and residents.
• Public Sector Assets (London Borough of Sutton): Sutton have let the former BHS store in their town centre to Oru Space to deliver a wellbeing-focused workspace for local creatives, entrepreneurs and residents who combine ‘profit’ with ‘purpose’.
• Direct Delivery (London Borough of Enfield): Ealing have worked with Bloqs to directly deliver a new a 30,000 sq ft maker space - it is effectively a large workshop that supports makers and creators undertake a range of activities, from engineering and wood to metal, digital and additive technology.

London is also home to the Creative Land Trust, which is an organisation set up by the Mayor of London, Arts Council, Bloomberg Philanthropies and Outset to secure affordable workspace for artists and makers, and make it available for studio providers to rent. The organisation has a clear mandate to acquire space in perpetuity to support the creative industries - one of the most vulnerable sectors in the city.

Rising rates

The emphasis on ‘affordable’ workspace provision in London is warranted given commercial rents have risen significantly over the last two decades, linked to increasingly constrained supply. These issues are not, however, exclusive to London – many towns and cities across the country are facing supply issues which are being exacerbated by permitted development rights (PDR). Where demand remains strong this has led to rising commercial rents.

This is highlighted in our analysis of city centre office markets in the UK’s ‘Big Nine’ cities. As the table below shows rents per sq ft have increased significantly in these places over the last decade – most notably in Bristol (+103%), Manchester (+54%) and Edinburgh (+45%)¹. These rises have left rents as high as c£29, £28 and £26 per sq ft in Edinburgh, Manchester, and Birmingham city centres respectively, which is unlikely to be affordable for some smaller enterprises in certain sectors.

Similarly, our analysis of major town and city centre office markets across the Home Counties shows that many of these have also experienced significant increases in rents over the last decade with many having comparable rents to some parts of London – most notably Slough (c£34 per sq ft), Reading (£33 per sq ft) and Guildford (£31 per sq ft)². While most of these locations have clear and robust employment land policies, and some make reference to accessible space for SMEs, few require affordable space to be provided as part of large schemes.

 

Big Nine City Centre Office Markets

Office Market	Rents Per Sq Ft (2022)	Rent Per Sq Ft Change (2012 - 2022)
Birmingham	£26.26	+34%
Bristol	£24.80	+103%
Cardiff	£19.56	+30%
Edinburgh	£29.23	+45%
Glasgow	£20.27	+11%
Leeds	£25.87	+37%
Liverpool	£17.55	+21%
Manchester	£28.19	+54%
Newcastle	£18.25	+15%

 

Home Counties Major Town and City Centre Office Markets

Office Market	Rents Per Sq Ft (2022)	Rent Per Sq Ft Change (2012 - 2022)
Basildon	£23.38	+49%
Bracknell	£22.72	+52%
Chelmsford	£24.75	+40%
Colchester	£15.23	+74%
Guildford	£31.41	+41%
Hemel Hempstead	£16.50	+27%
High Wycombe	£20.96	+17%
Maidstone	£16.69	+57%
Milton Keynes	£22.00	+56%
Reading	£33.03	+44%
Slough	£34.29	+42%
Southend	£11.16	+20%
Stevenage	£18.29	+34%
Watford	£29.60	+80%
Woking	£29.98	+43%

 

Careful considerations

While ‘affordability’ is broader than just headline rents, and impacts industrial uses as well, these figures illustrate where affordability pressures are likely to be highest. Based on this, places outside of London and across the UK should consider ‘affordable’ or, better still ‘accessible’, workspace more closely in terms of both planning policy and practice. Some, such as Brighton and Manchester, have considered this and we advocate that it continues to be explored in such locations.

 

“Affordable workspace provision is an investment, typically public sector initiated or funded projects that develop and grow local businesses that will benefit the place in the longer term. Both in economic and social impact, but also placemaking as areas harness local talent and distinctiveness. Affordable workspace is also a way to diversify the high street offer, where conventional town centres are struggling. As such, they are suitable for areas all across the country where either market rates are high and beyond the reach of particular industries that are beneficial to the vibrancy or economy of an area, such as creative industries, start-ups or retail. Additionally, areas where there are demographics that are typically excluded from the commercial property sector, such as areas with high deprivation, affordable workspace can increase access to space and support enterprise within communities that might not otherwise consider or be able to take the risk of taking space on.”

- Emily Berwyn, Executive Director, Meanwhile Space.

 

Planning policy has proven effective to an extent in London and has catalysed a number of innovative and accessible spaces across the city (e.g. 246 Ealing Road and Tripod). This approach could be adopted in some other high-cost locations, but as set out in our first blog post there is an opportunity for future policies to be more nuanced and holistic than the first wave of ‘discount to market rent’ policies adopted across London (‘1.0 Affordable Workspace Policies’).

Any policies introduced outside of London will have to be highly conscious of viability challenges, most notably where a discount to market rate approach option is included. This is because the type of heavy discounts that some operators require to pass on meaningful reduced rates to occupiers - sometimes more than 50% - will not be viable in many locations, requiring other approaches or public subsidy to be considered.

Beyond policy, there are a wide range of other levers that local authorities and other stakeholders can consider to deliver more ‘affordable’ space, some of which have been outlined earlier in this chapter. Our ‘top five’ options for consideration are:

• 1. Re-purposing older and under-utilised public sector buildings (see Platf9m, Brighton).
• 2. Activating under-utilised sites in prime town centre locations (see SPARK, York).
• 3. Setting up grant and/or loan funds to encourage ‘affordable’ operators to open spaces (see Lambeth Future Workspace Fund, London).
• 4. Directly delivering new ‘affordable’ spaces as part of mixed-used regeneration schemes (see Plus X, Brighton).
• 5. Creating workspace portals that advertise and market small unused spaces that could be let to local enterprises (see Open Poplar, London).

While we are currently entering a challenging period for public and private bodies alike, linked to the recession and cost-of-living crisis, there are several socio-political shifts that underline the importance the ‘affordable’ workspace discussion at a national scale. Two of the most prominent are:

• Minimum Energy Efficiency Standards (MEES): By 2030 the Government’s MEES regulations will mean that all non-domestic properties will need to achieve an Energy Performance Certificate (EPC) grade B or above unless holding an exemption. As set out in our Building Zero: The Road to Zero Carbon Logistics report we estimate that this will require in excess of 89,900 industrial units, and even more office blocks, to be refurbished or re-developed to comply. We anticipate that this will see significant swathes of commercial space removed from the market in some parts of the country, particularly where viability is a challenge, meaning that public sector partners and other stakeholders will need to step in to support their economies through innovative solutions. Some have already started doing this such as Nexus in Leeds which is an exciting tech cluster curated by the University of Leeds and other partners, including the Leeds City Region Enterprise Partnership.
• Hybrid Working: The rise in hybrid working following the COVID-19 pandemic has led to distinct patterns of workspace usage particularly among established businesses – Tuesdays, Wednesdays and Thursdays generally see the highest levels of occupancy with Mondays and Fridays typically quieter. On these quieter days established occupiers could be encouraged to consider whether space could be provided at discounted rents to start-ups or community-oriented organisations to ensure space is productive throughout the week. We have seen some clients interested in this agile adaptive occupancy model, and it could present a low-cost and innovation solution to support entrepreneurship within prime town and city centre locations across the country.

Where any initiatives are implemented, it is important to note that they should, however, respond to local demand, while also looking to capitalise on local economic strengths and opportunities, and addressing local economic weaknesses and threats. Models used elsewhere will not necessarily translate to other contexts, so any options pursued will need to be tailored to local conditions and circumstances.

---

¹CoStar, 2023
²ibid