Written evidence submitted by the London Property Alliance [PDR 071]

 

Summary

 

  1. The London Property Alliance supports deregulating the planning system to make it faster and more responsive, where this would support the economic success and vitality of towns and cities.

 

  1. The continued attraction and health of town and city centres, including London, depends in part on the concentration and variety of commercial uses they accommodate alongside their resident populations.  The dilution of commercial uses in town and city centres threatens their continued success and ability to contribute to economic prosperity and recovery, and job creation.

 

  1. Central London has, within the last decade, seen such a change with the conversion of a substantial quantum of commercial premises to residential use.

 

  1. Retaining the ability to control such changes of use in a city and town centre context, through the planning system, is therefore essential.  The ability of Local Planning Authorities to use Article 4 directions to retain planning control over some changes of use, in contexts where this is justified, such as parts of town and city centres and Central Business Districts, should be preserved.

 

About the London Property Alliance

 

  1. The London Property Alliance brings together the City Property Association and the Westminster Property Association. The Alliance represents over 500 property landowners, investors and developers entrepreneurs and professional advisors active within Central London. Copies of our membership lists are at these links [CPA and WPA].

 

  1. The Alliance seeks to promote central London’s economic, social and environmental wellbeing, which is essential to sustaining and enhancing central London’s function as a leading World City.  The Cities of London and Westminster are home to c. 260,000 people. They are home, along with  parts of some neighbouring London Boroughs, to the “Central Activities Zone” (CAZ), which is the heart of London’s world-class economic, cultural and tourist offer. 

 

  1. The Alliance has previously responded to the Government consultations on the Planning White Paper, the “Supporting housing delivery and public service infrastructure” consultation on commercial to residential changes of use, and the National Planning Policy Framework and National Model Design Code” consultation on changes to the NPPF.

 

Context in Central London

 

  1. The Alliance’s 2020 research Good Growth in Central London, prepared by Arup and launched immediately before the March 2020 Covid-19 lockdown, indicated that the CAZ, along with the northern Isle of Dogs (Canary Wharf) supports almost two million jobs, and some £211bn in economic activity (constituting about 10% of UK total Gross Value Added).[1]

 

  1. The success of the CAZ is characterised by its diverse and distinctive mix of uses within walking distance of each other, including office space as well as leisure, tourism, retail, cultural uses and other functions, for which there is extensive demand[2]Sustaining and enhancing this mix of uses is essential to its character, function and attractiveness, or ‘draw’, to workers and others as a place to visit, and will therefore be key to its recovery from Covid-19.  The pandemic has demonstrated the impact of changes in working behaviours, drastically reducing trips to central London and the activity associated with office workers, on which the success of the CAZ depends[3]. Accommodating the demand for this mix of uses will therefore be vital to ensuring and supporting central London’s post-Covid recovery. 

 

  1. At a smaller-scale level, office developers often include non-office commercial uses at ground level to help create distinctive and attractive places to which tenants, and their workforces, will want to move.

 

  1. The London Plan, which is the regional strategic planning policy document for decision making in Greater London, therefore clearly identifies these commercial land uses, and other “strategic CAZ functions” as being of greater priority than some other uses (such as residential use) in most of the CAZ[4]

 

  1. Within the City of London, at the heart of the CAZ, the City has long sought to ensure that residential accommodation is located in specific clusters.  This is to ensure that, in the long term, the CAZ’s vibrancy and activity is retained.  Careful balancing and control of land uses within the CAZ, which has traditionally been achieved via planning control, is required to sustain and enhance its critical role both for London at a regional level and for the whole of the UK.  The uncontrolled ‘dilution’ of strategic CAZ functions, by the conversion of non-residential buildings to residential use, for example, should be avoided. 

 

  1. The development value achieved by residential development in the CAZ is usually substantially greater than for non-residential uses

 

  1. By way of comparison, we have adopted a broad definition of “prime” residential as being property in the upper quartile of value across Greater London as a whole.  This is currently c. £14,472/sqm (c. £1,350/sqft)[5].  In practice, the CAZ can prove attractive for very high value / super-prime residential accommodation, with values frequently in excess of £21,500/sqm (£2,000/sqft) and in some limited cases rising above £80,000/sqm.  The average value of new private residential accommodation in the CAZ in Westminster and the City of London is therefore likely to be considerably higher than the Greater London upper quartile value.

 

  1. Conversely, office capital values for the City of London, Midtown and West End are between c. £9,000 and £13,000/sqm, significantly below even the London-wide prime residential average.[6]

 

  1. In general terms, away from specialist retail clusters such as Bond Street, retail values, and values for other commercial, but non-office, uses now within Class E will generally be lower than offices.

 

  1. This indicates that there is likely to be significant pressure for the conversion of office accommodation, and other commercial accommodation, to residential, especially away from the prime West End commercial / retail locations, even where a very good prospect of that accommodation’s use for a range of alternative commercial uses would have, otherwise, remained, as London’s commercial and mixed-use core remains an exceptionally attractive environment for a range of commercial uses.

 

  1. This has been the Alliance’s experience of the central London market over the last 10 years.  Roughly 720,000 sqm of office accommodation has been lost to other uses solely in the City of Westminster (which covers much of the CAZ) since 2005[7].  This office space was lost primarily to residential use, during a period when such changes were supported by local policy.  Both Westminster City Council and the City of London, with the Alliance’s support, sought to change policy to prevent office to residential conversions in order to protect the West End’s economic core and the CAZ has been exempted from office to residential permitted development by an Article 4 direction.

 

  1. Covid-19 has showed the reliance of city centre economies on a significant working population, a trend likely to be exacerbated in the short to medium term in London whilst international tourism is likely to remain depressed in the aftermath of Covid-19[8]. 

 

  1. Introducing significant residential conversion of existing non-residential buildings in the CAZ could disrupt the strategic function of the CAZ in numerous ways:

 

    1. The direct loss of employment and other ‘town centre’ floorspace within the CAZ for which there would, otherwise, be demand from commercial occupiers, is likely to lead to the permanent loss of the associated jobs, both direct and indirect, and linked expenditure and will detract from London’s world-class economic, social, cultural and leisure role, including its attraction as a place for new businesses to open and for workers, visitors and tourists to come.

 

    1. The reduced potential for future redevelopments which respond to the changing role of the CAZThe residential conversion of Class E buildings is likely to cause the fragmentation of ownership in city and town centres (with residential conversion likely to result in the granting of long leasehold interests to a wide number of owners).  This undermines the long-term economic capacity of central London to grow, due to the lack of potential development sites in single ownership and the challenges of site assembly.
    2. The constraining effect of new residential accommodation.  Creating new residential accommodation in otherwise commercial areas often leads to the creation of additional constraints on future commercial uses nearby, due to the need to protect residential amenity and the potential sensitivity of residential occupiers.  This would further worsen the health and vitality of town and city centres as the number and concentration of uses such as shops, gyms, health centres and restaurants is reduced, whilst creating new operating restrictions on remaining uses.
  1. This would harm the ability of town and city centres such as the CAZ to accommodate the economic, social and environmental development which supports the wider nation.

 

  1. The Alliance therefore provides the following responses in relation to the relevant questions in the Call for Evidence.

 

What role should permitted development rights (PDR) play in the planning system?

 

  1. The Alliance supports changes to the planning system that can make it faster and more responsive.  Permitted development rights have a role to play in this, alongside other changes.

 

  1. The changes to the Use Classes Order in September 2020, which created the new Use Class E, a positive example of regulatory change which supports economic growth and development.  This grouped many commercial uses found primarily in town centres, such as offices, gyms, shops and restaurants, into the new Class E. This allows premises to change use to alternative uses within Class E without the need for planning permission. 

 

  1. The introduction of Class E has allowed substantial additional flexibility for commercial premises to respond to rapidly changing demand, without the delay associated with seeking planning permission for change of use.  This has reinforced the core role of town centres, by ensuring they can provide an attractive range and significant concentration of those uses which draw people to them for work, leisure and other purposes.  The Alliance considers this to be a significant, positive, change.

 

  1. The alteration of, or creation of new, PDRs in appropriate circumstances will increase and accelerate desirable development by removing the requirement to submit a planning application, providing greater flexibility for businesses to change the way in which they use space without needing planning permission.  This is a valuable role. 

 

  1. However, PDRs should support the aim of ensuring that space is available to a range of commercial uses in places where there is demand for it, rather than potentially risking its loss to residential uses.  The Alliance is not persuaded that allowing Class E to residential conversion is, therefore, necessary

 

  1. If the Government considers that, on balance and across the country, this PDR is required to ensure commercial space that is now genuinely surplus to requirements is released for residential use to help address the country’s acute shortage of housing, it is essential that local authorities can continue to use Article 4 directions to exclude some parts of their areas from the right, to protect the function and attraction of parts of their town and city centres where a realistic prospects of continued occupation by commercial uses remains.

 

What is the impact of PDR on the ability of local authorities to plan development and shape their local communities?

 

  1. The tension between responsiveness to market demand and local control of land use is often at the heart of planning decision making.  PDR, by allowing greater responsiveness to market demand without local authority intervention, does reduce the ability of local authorities to plan development and shape their communities.  In some circumstances the removal of intervention by planning control is appropriate

 

  1. For example, the creation of Class E, grouping the town centre uses together, achieved the goal of allowing the market for space in town centres to respond to changing demands by removing changes between town centres from planning control.  This simplified and accelerated such changes of use, which are essential to ensuring town centres accommodate the changing and diversifying uses which those visiting and working in town centres demand.  This in turn sustains and enhances town centres, and their contribution to the economy, overall.

 

  1. Permitted development rights allowing changes of use (such as from office to residential) where there is no realistic prospect of commercial floorspace coming back into commercial use and space could be better repurposed for good quality residential use (rather than remaining vacant) may also be appropriate in some places.

 

  1. In core parts of Central London, however, the Alliance’s experience is that the change from town centre uses to other uses such as residential, is not generally appropriate, as demand continues to exist for a range of commercial uses, whereas the introduction of residential use would ‘dilute’ the ecosystem of activity which sustains town centre uses.

 

  1. In the Alliance’s experience in central London, for example, significant new residential development in the CAZ has been most successfully located by ‘clustering’ it in locations which do not disturb the areas of the most economically significant, non-residential development.  This has been pursued effectively in parts of the City of London, for example, which has seen the growth of a small residential population without compromising its ability to also deliver the substantial commercial development which forms the core of the CAZ.

 

  1. The Alliance therefore has concerns that widely used PDRs which remove local authority control without geographic exemptions reflecting the varying role and character of different parts of the country, could hinder economic growth in city centres, such as the CAZ in central London, by allowing development which dilutes the clusters of activity which support town centre vitality and constrain their long term capacity for intensification and growth through fragmented ownership and additional amenity constraints.

 

  1. This reinforces the case for continuing to allow for a system of exemptions on a geographical basis from new or amended PDRs. This will help to ensure the delicate balance of uses in town and city centres, including central London, is maintained. 

 

  1. The Alliance suggests that retaining the current ability of LPAs to use Article 4 Directions flexibly to suit local circumstances, is the most appropriate tool available to achieve the required balance of control. 

 

  1. Further restricting the ability of LPAs to use Article 4 directions, as has been suggested in recent consultations (“National Planning Policy Framework and National Model Design Code: consultation proposals”) should not, for this reason, be pursued without ensuring that an alternative mechanism to moderate the impact of PDR is in placeWithout the use of a mechanism such as Article 4 directions, unintended damage to the economic, social and environmental health of town centre uses may result.  

 

Is the government right to argue that PDR supports business and economic growth?

 

  1. PDR, where used appropriately for the context, has the potential to support business and economic growth by making to easier to bring vacant buildings back into viable alternative uses. Across many parts of the country, PDR allowing office to residential conversion have succeeded in allowing vacant commercial buildings to be converted quickly for residential use[9]. 

 

  1. This has helped to provide new homes on brownfield land which would otherwise have remained vacant, in a sustainable manner reuses, rather than redevelops, existing buildings. This has been applied most successfully to locations where land values, and the demand for town centre uses, is no longer high in relation to the supply of floorspace already available in those uses.

 

  1. In other contexts, however, such as central London and many other town and city centres, PDR could allow relatively unrestrained change of use from town centre uses to other uses, in particular residential.  This would dilute the clustering of the core economic activity, and therefore the key function, of these locations. 

 

  1. We have noted in the introduction the significant disparity between residential and commercial values in the CAZ.

 

  1. Maintaining and enhancing this key function, which draws visitors and workers to urban centres, is threatened by the potential changes in working behaviour triggered by the pandemicImplementing the potentially unrestrained change of use from town centre to residential use under PDR could, therefore, seriously threaten the viability of town and city centres.  This would be harmful not only to the economic, social and environmental development of these locations themselves, but also the economy of the wider country, given the contribution of town and city centres to the nation’s economic productivity.

 

  1. This reinforces the case for ensuring that new or amended PDR include sufficient regulatory safeguards and tools to protect and support the economic, social and environmental development of town and city centres.

 

Is the government’s approach to PDR consistent with its vision in the Planning White Paper?

 

  1. The 2020 Planning White Paper published in 2020 considered a range of improvements to aspects of the planning system, across its policy and decision-making functions.

 

  1. The PWP focussed heavily on increasing and improving housebuilding across the country.  This is vital, but the Alliance’s response to the White Paper also noted that the needs of key sectors other than housing, such as those sustaining our complex urban centres, were not addressed within it.  The approach to PDR is therefore consistent with the White Paper in that, whilst great emphasis has been placed on the need to increase and improve housing delivery, the very important role of supporting and enhancing our town and city centre ecosystems has been afforded relatively little consideration, despite their complex relationship with planning control

 

  1. The Alliance is concerned however that, like some of the reforms proposed in the White Paper, the application of broad regulatory reforms like PDR, could deliver outcomes which fail to support, or even harm, the health of our town and city centres, as complex environments where the balance of different uses and forms of development is critical. 

 

  1. For the reasons set out in its response, the Alliance’s suggestion is that care should be taken to ensure the important contribution of town and city centres to the UK economy is strengthened, rather than threatened, by future regulatory changes in planning.

 

Concluding Remarks

 

  1. The Alliance welcomes this opportunity to contribute to the Call for Evidence and looks forward to the progression of the Inquiry.

 

 

 

April 2021


[1] Good Growth in Central London (Arup, for London Property Alliance, March 2020) available at https://www.westminsterpropertyassociation.com/mipim-good-growth-for-central-london-seminar/

[2] The economic future of the Central Activities Zone (CAZ) Phase 1 report (Arup, Gerald Eve and London School of Economics, for the Greater London Authority)

[3] The impact of office workers’ absence on central London’s economy (Arup)

[4] Policies SD4 and SD5 of the London Plan 2021

[5] Q4 2020 Quarterly Digest (MSCI, 2020)

[6] Gerald Eve LLP / MSCI

[7] City Plan 2019-2040 (City of Westminster)

[8] The economic future of the Central Activities Zone (CAZ) Phase 1 report (Arup, Gerald and London School of Economics, for the Greater London Authority)

 

[9] Assessing the impacts of extending permitted development rights to office-to-residential change of use in England (Royal Institution of Chartered Surveyors, May 2018)