Which locations are right for ‘affordable’ workspace in London?

 

 

Achieving agglomeration effects

This blog post considers which locations are right for ‘affordable’ workspace and is the third in our five-part series on ‘affordable’ workspace. It builds on our first article which considers how ‘affordable’ should be defined, and sets out our recommended policy response, and our previous post which emphasises why it is important to provide ‘affordable’ workspace.

Preferred places

The famous adage when buying a new house is ‘Location, location, location’. The idea is that a house in a desirable location will always be in demand when coming to sell in the future. The same applies to commercial properties – those that have the ‘right’ offer in the ‘right’ places will attract occupiers and should, in theory, continue to do so into the future when they have flexibilities built in. The ‘right’ offer and location varies from business to business, and many invest heavily in location analytics to help them decide which places best support their business needs.

Despite this, many existing ‘affordable’ workspace policies do not recognise this and take blanket borough-wide approaches to securing space – they often expect commercial developments to provide a percentage of ‘affordable’ floorspace at a certain discount to market rent irrespective of location. Most do not set out what sectors and corresponding typologies should be supported in each location, even though some parts of a borough will be more suitable for some economic activities than others. For example, through our work with businesses and local authorities we know that the following sectors have the following general requirements:

• ‘Professional’ businesses, including lawyers, architects, engineers and accountants, often prefer high-quality managed workspaces close to town centres, strong public transport connections and well-qualified populations (e.g., Uxbridge Town Centre);
• Small-scale manufacturing businesses, like food producers, fashion manufacturers and craft brewers, often prefer light industrial units close to strategic road networks, other industrial businesses and skilled populations (e.g., Cray Valley);
• Digital businesses, such as video game designers, software producers and virtual reality specialists, often prefer managed workspaces or digital studios in city centre locations, preferably in technology clusters, with access to a wide pool of highly-qualified technical specialists and ultrafast digital connectivity (e.g. Silicon Roundabout); and,
• Life science businesses, including pharmacists, medical technologists and biotechnologists, often require wet and dry lab spaces that are close to major universities, hospitals and/or researchers with strong public transport links (e.g., White City).

Proactive policy

Due to this, we believe that future ‘affordable’ workspace policies should provide location-specific steer on what should be provided where and for who – preferably with clear design guidance. This should link in with a borough’s economic strategy, with the workspace policy acting as the land use pillar of said strategy.

Crucial to this is the idea that new ‘affordable’ workspaces should be introduced where they cater to businesses that complement and support existing clusters of economic activity – an ‘ecosystem’ approach is important to understand interactions between business sectors and scales. This is because new ‘affordable’ workspaces in these locations are more likely to survive as demand is likely to be strong from likeminded businesses, and because it can help generate agglomeration effects. Complementary business that are clustered together are more likely to:

• Share ideas and innovate together due to their proximity;
• Be able to attract the right talent and skills for their industry;
• Require similar suppliers and services generating economies of scale;
• Attract supply chain businesses boosting local economic growth;
• Collaborate and co-invest in shared technology and equipment;
• Continually compete and look for a market advantage; and,
• Attract likeminded businesses and supporting industries to an area.

These factors ultimately drive economic growth and support productivity. Clusters of interesting business activity can, where carefully designed, also support place shaping objectives given the footfall and vibrancy employees can bring to an area.

Our view therefore is that commuted sums or Payment in Lieu options should not be viewed as negatively for ‘affordable’ workspace policies as they are for affordable housing policies – in relation to housing commuted sums are typically considered as an exception to on site provision. While the preference should be to provide the ‘right’ type of workspace where new commercial development comes forward, commercial space is much more place sensitive than housing, so in some instances the provision of ‘affordable’ workspace may be not be as suitable on site as it is in other locations within a borough. Where other under-funded opportunities exist to provide ‘affordable’ workspace in more suitable locations a commuted sum option may be a better solution.

Similarly, if a location is not ideally suited for ‘affordable’ workspace provision (e.g. away from other commercial uses or likeminded businesses) commuted sums could be collected to top up an ‘affordable’ workspace fund that could be used to subside the provision of future workspace. The London Borough of Lambeth have a fund of this nature called the Future Workspace Fund, a £6.9m by application loan and grant fund to support ‘affordable’ and supportive workspace providers activate new workspaces that help grow sector clusters and enhance the affordability of space for local enterprises.

Considered councils

Where designing future location-responsive ‘affordable’ workspace policies, local authorities should consider the following questions:

1. What are our priority sectors to grow, attract and retain?
2. What workspace typologies do our priority sectors demand?
3. What are our priority sectors’ affordability challenges?
4. What are our priority sectors’ location requirements?
5. Which locations are most suitable for our priority sectors?
6. Where do existing clusters of economic activity exist?
7. What are the aspirations of our economic strategy and how can this policy support them?
8. Are there are any locations that are not suitable for ‘affordable’ workspace provision?
9. What are our priority locations for ‘affordable’ workspace provision?
10. Do we have any priority ‘affordable’ workspace projects in the pipeline that would benefit from additional funding support?
11. Are there any locations that are well-suited for community and socially-oriented workspace provision

Considering these questions should help boroughs develop responsive policies that maximise the economic impact of any ‘affordable’ workspace provision through the generation of clustering and agglomeration effects.