When the UK is in the midst of what appears to be an unsolvable housing crisis it is very easy to see why the focus for development is on residential and how disused and empty offices have become a magnet for housebuilders to provide much-needed (and, of course, lucrative) homes for sale or rent.
But as we push to develop more housing, workspace – particularly in London – is being lost. And it is the type of workspace that feeds and drives many of the entrepreneurial businesses that provide the lifeblood for London’s communities.
So how do you provide suitable housing and places to work? How do you balance the need to develop homes with the need to keep commercial workspace?
It is a difficult problem to solve but there is a solution. It’s not an easy solution, but a solution nonetheless.
What is it? Mixed use. Proper mixed use that combined places to live with places for businesses to establish themselves. Mixed-use developments that create communities.
A recent report from GVA, Places that Work, outlines how it believes a new mixed-use asset class in London can work. And how the format can be extrapolated across UK cities struggling with the same dilemma.
But first the problem. In London alone, between 2010 and 2015 more than 260 acres of industrial land per annum was lost. By next year, at least 30% of the capital’s creative artist or light industrial space is expected to have been lost. Add to that the amount of office space that has been converted to residential use and the amount of employment space lost rapidly mounts.
There is, of course, an argument that it shouldn’t really matter how disused space is used as long as it finds a use. And, housing – affordable housing – is needed.
Keeping the balance
But every person who needs a home also needs work and a community. And at a time when businesses are struggling and our high streets are getting ever more empty, surely the time has come for a joined-up approach.
According to the Places that Work report, mixed-use developments are currently viewed as complex and risky and very little real thought is put into the units given over to commercial use. They are an afterthought to the much more valuable residential that often sits above.
That unwillingness to view workspace in mixed-use developments as fundamental to the success of a scheme and its value is understandable. There remains a reluctance from residents to live above a commercial property and a reluctance from mortgage lenders to lend on such properties. Those attitudes will not change unless these developments are able to showcase the benefits of a live/work community in a single building. And, says the report, there is a lack of skill in planning and design to deliver such a building just yet.
However, the world of work and of living is changing and it could bring about the shift that is needed to bring a real mixed-use sector into being. To turn it into an investible and developable sector.
Technology is changing the way we work. It is changing industrial businesses, making the work they do easier from smaller spaces, quieter, less environmentally damaging. It is also driving a change in the way people work. Enabling them to be more flexible. To blur the lines between work life and home life. Why not blur those lines within development too?
Flexibility is key
The growth of the build-to-rent sector, which now has billions of pounds of investment from some of the biggest institutions in the UK, is also changing developers’ and investors’ attitudes towards ground-floor uses.
Flexible workspace, cafés, shops and studios are fast becoming a vital element of a build-to-rent development, adding viability and vibrancy.
London has the potential to deliver more than 3m sq ft of commercial space through a new approach to mixed-use, a supply that would go some way to feeding the 4m sq ft of urban workspace demand that exists in the capital.
Of course, there are barriers that need to be overcome to enable the establishment of a new mixed-use sector. Any affordable quota above 35% makes developments of this kind unviable, according to GVA’s analysis, and with funding cuts across local authorities and a general lack of expertise in typologies and design, establishing the sector will be an uphill struggle.
But if mixed use was to get the same public sector support the build-to-rent market has, if local authorities could shift their focus slightly from residential and started using low-cost borrowing to deliver workspace and if a clear policy framework could be drawn up, would those barriers come tumbling down?
“There is a now a wider recognition that rather than being a burden, well-considered enterprise space drives financial and social value, becoming part of the shared neighbourhood infrastructure that supports local jobs, skills and resilience,” states the report.
GVA director and one of the authors of the report, Martyn Saunders, concludes: “A concentrated approach is needed to hurdle the remaining obstacles to enable delivery at scale… There is no silver bullet to achieve the gear shift we need. The public sector has a big role to play but the private sector and housing associations need to be the real driving force to push it forward.”
Five ways to create a mixed-use sector
- Create a London Commercial Space Co-Investment fund: The GLA and the London Economic Action Partnership (LEAP) should establish a fund of around £100m that works with councils to de-risk projects through shared investment. The fund could be topped up with business rate and private sector contributions.
- Create Local Economic Growth Companies (LEGCos): The GLA, LEAP and local authorities should work with housing associations, landowners, sector bodies, BIDs, workspace providers and operators to seed fund and support the establishment of LEGCos. LEGCos would hold and manage employment space where there is potential for mixed employment/residential development at scale. LEGCos would be able to operate across administrative boundaries.
- Enhance and update planning policy: Supplementary planning guidance needs to be updated and enhanced to support delivery of a new mixed-use asset class. Policy-linked good practice guidance should be established alongside this.
- Establish and showcase five exemplar projects: The GLA and local boroughs should work together to establish five joint venture projects that showcase exemplar development in mixed-use projects.
- Build capacity and awareness within the professional bodies: Creating a new asset class that requires changing the psyche of Joe Public to make it desirable to live above a workplace – and of the banks to make it fundable – cannot be done without collaboration. The industry as a whole must come together to promote mixed-use as a new way of living and working.
Best practice in mixed-use development
While real mixed-use has yet to become an established asset class, there are a handful of outliers that are delivering developments that could be used as a blueprint for future project. Here we take a look at three of them.
Caxton Works, Canning Town, E16
A project by U+I and Galliard Homes that has delivered 300 homes on top of 20,000 sq ft of ground-floor B1 employment space on a site that once comprised a bakery and electrical supplies warehouse.
To make sure the space is attractive to enterprising businesses – and to attract life to this emerging part of London – U+I offers space from as little as £6 per sq ft for the first three years of occupancy. The low rents mean demand is high and flexible lease terms mean the developer is able to control the tenant mix, keeping it fresh and attractive for those who live at the scheme.
Royal Albert Wharf, Beckton, E16
Notting Hill Genesis Housing Association has turned a former industrial site at east London’s Royal Albert Wharf into mixed-use scheme providing a mix of homes and some 97,000 sq ft of commercial space.
Instead of selling off the commercial element and focusing on housing, Notting Hill decided it would manage the space itself, working in partnership with the Bow Arts Trust to ensure the space was available to the creative industries. So far more than half the space is occupied, with artist studios, a café, event space and a Co-Op all part of the line-up.
Devons Road, Bow Enterprise Park, E3
As a dated 75,000 sq ft industrial park owned by Workspace Group, Bow Enterprise Park was rapidly losing tenants. That was until Workspace teamed up with Poplar HARCA and Leaside Regeneration to reconfigure the site as a mixed-use development, providing 67,000 sq ft of B1 space alongside residential.
The land was purchased by Peabody, which has already developed almost 400 homes on the site, with Workspace remaining involved letting and managing the eight work units.
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