“The problem with constantly referring to industrial floorspace capacity and square metres is that it doesn’t give you enough detail or information about what’s being lost or gained. It doesn’t tell you the typology of the space or its affordability. From that figure it doesn’t give you the right types of detail such as how valuable they are for startups or SMEs.”

Industrial Sector Development Manager, London borough

London can no longer afford to lose industrial land, according to the last comprehensive study of demand conducted in 2017 to inform the London Plan. Looking at how demand is expected to change over time, the study concluded that London should only release nine of its 7,000 hectares of industrial land every year. This is a more-than-tenfold reduction from the 106 hectares released annually between 2010 and 2016. ¹⁸

The notion that London can still afford to release some of its industrial land has since been challenged, most notably by the Planning Inspectorate in its 2019 report. It noted that since local authorities had already earmarked 800 hectares for release by 2018 – a move which would likely result in a loss of industrial floorspace – London would actually need an estimated 330 additional hectares of industrial land. ¹⁹

Part of the dispute over how much industrial land London needs to function also depends on assumptions about how that land is built up and used. More efficient uses of industrial land (for example by building multistorey workspace) allow for more release elsewhere, but building over several stories is more (or less) cost-effective depending on the activity it has to accommodate – for example, ensuring lorry access to upper floors is particularly expensive. Where land is being released is also important – generally inner London boroughs have released a lot more industrial floorspace (see Appendix), which made the shortage most acute there.

For industrial land occupiers, it’s not just the amount of floorspace that matters. Like homes or offices, workshops and warehouses need to be in the right place, of the right type, and at the right price points. If anything, industrial land occupiers have more diverse requirements than other uses, reflecting the wide range of activities taking place on industrial land. Businesses such as distribution centres or waste recycling plants need large, standalone warehouses: others, such as jewellery workshops, work well in shared buildings. Generally, however, industrial land occupiers do have a set of core needs, which we set out below.

Core needs common to most industrial land occupiers:

• Flexibility of accommodation. This enables businesses to fit out their own activities and allows for growth or leasing to other businesses if the market context changes. For light industrial uses, railway arches are often hailed as a good example of flexible space, as they can host activities ranging from wholesale and car repair to food-making and micro-consolidation.
• Good public transport links to attract workers.
• Access to suitable utilities such as energy input or wastewater output. The ability of the electricity grid to support local vehicle charging is a growing and significant concern.
• Accommodation free from pollution. Previous activities may have rendered former industrial sites unusable without significant investment to clean them up.

Core needs that differ across industrial land occupiers:

• Sufficient yard space that can be used for activities such as storage or production.
• Quick and reliable vehicle access for freight and deliveries, so businesses can get their supplies and reach their customers easily.
• Proximity to homes and high streets. This reduces the need to travel and may be necessary for customer-facing or rapid deliveries.
• Affordable premises for startups or businesses that add other types of value to the city.

Does London’s industrial economy have the accommodation it needs?

The drop in the vacancy rate for industrial premises from 16 per cent in 2001 to around 4 per cent in 2021 may seem to indicate that London’s industrial space is being well used. ²⁰ But such a low vacancy rate really suggests that demand is not being met. Vacancies have been particularly low for buildings. The 2017 London Industrial Land Demand Study showed that in several London subregions, including central London, there were virtually no vacant industrial buildings for businesses to move into (see Figure 1 below). At the time of writing, this is the most recent available data – but it is also worth noting that since 2020, demand for industrial land has been boosted further by the boom in personal deliveries due to the pandemic. ²¹

Source: London Industrial Land Demand Study (2017). ¹⁸

Such low vacancy rates mean that industrial businesses are highly unlikely to find accommodation that meets their needs at a price they can afford. Anecdotal evidence from our interviews confirmed that industrial businesses have great difficulty in finding suitable space to operate from in London:

“For a long time we have been looking for the ideal property to make our home, we needed a mixture of office space and meeting rooms, light industrial space, as well as a laboratory – it’s difficult to find a place like this in London that is ready to move into immediately. That’s because we needed a site that is mixed, that is quite big and where we’ll also have room to grow into. Our biggest issue has been finding a space within the central London area. As a young company, a lot of our team are recent graduates and want to live in London. So we needed somewhere that’s relatively close to the city and had a substantial power supply for their equipment. We could find places that were big enough but not any that had all of these things in combination, with the necessary infrastructure like electricity and right lighting.”

Founder, waste transformation startup

New industrial buildings are being built but there are relatively few of them, and they tend to be designed for high-value, high-growth industries such as logistics or data centres. More traditional industrial activities have reported that the demand for logistics space has further inflated industrial rents. Yet logistics businesses themselves have expressed how difficult it is to find space for consolidation centres
within London – especially sites that offer proximity to consumers, good transport links and energy infrastructure to support vehicle electrification. ²³

On top of this, the latest data suggest that industrial land release has continued since the last assessment of industrial land supply was conducted – both in inner and outer London boroughs – indicating that shortages of accommodation are likely to have worsened in the last few years.

Source: VOA (2021). Non-Domestic Rates, Table FS4.1: Industrial sector – total floorspace by administrative area, data to 31 March 2021. ²⁴