Leeds Bradford Airport - Employment Hub Assessment

Prepared on behalf of Leeds Bradford Airport September 2017

Final report

Contents Executive Summary 1 1 Introduction 3 2 LBA Growth Context 5 3 LBA Growth Drivers: Policy 11 4 LBA Growth Drivers: Economic 15 5 LBA Growth Drivers: Aviation 23 6 LBA Growth Drivers: Commercial 34 7 Airport Land Development Strategy 47 8 Economic Impact Assessment 56

Final Report Page 2

Executive Summary Creating an employment hub at Leeds Bradford Airport is important to the future development and expansion of the Leeds City Region economy. Specifically, it will:

 Support the growth of the airport as a key piece of strategic infrastructure in the local economy;  Enhance the portfolio of land and premises available to prospective occupiers and investors; and  Enable the creation of substantial net additional jobs, investment and tax revenues to Leeds City Region.

The growth of Leeds Bradford Airport incorporating a new strategic employment land allocation is recognised and supported as a key policy objective at the regional level as reflected in the Leeds City Region Strategic Economic Plan.

Cushman and Wakefield has been instructed to update its earlier Economic Hub assessment (which was branded under our firm’s former name DTZ) to inform the evidence base in support of the land’s proposed employment allocation in the Site Allocations Plan of Leeds’ Local Plan. The findings of this update reinforce the earlier conclusions which in summary are:

The Airport needs space to grow

Leeds is one of the largest city region economies in the UK, but has only the 15th largest airport (in terms of passenger numbers). LBA is forecast to double its passenger numbers by 2030 and it requires space to grow in order to realise this growth.

The development of an Employment Hub comprising land including both the emerging employment land allocation and land within Airport’s Operational Land Boundary (AOLB) is regarded by LBA as an integral component of the growth strategy for the Airport. The hub will support the Airport’s growth by:

 Providing space for the expansion of core operational and supply chain activities;  Enhancing its profile and ‘investability’ particularly to flight operating companies for route development; and  Strengthening the case for improved connections and accessibility.

There is an identified requirement for a large scale strategic allocation of employment land at the airport

In our earlier report we highlighted the economic development need and opportunity as demonstrated by:

 The fact that all other major regional cities are bringing forward dedicated strategic employment sites at airports to respond to the opportunity and demands of occupiers for land and property in close proximity to airports. There needs to be a comparable offer at Leeds Bradford Airport to enable the City Region to compete and to avoid the loss of occupiers;

Page 1

 The location offers a differentiated product that will complement rather than compete with other / emerging employment sites within Leeds; and  Arguably 1 ha of employment land at the airport has a greater economic development value as measured in net GVA terms than other locations because of the distinct and differentiated offer at the airport.

Since the production of our previous report in November 2014, the case has been strengthened for a strategic employment land allocation as a result of:

 The proposed allocation of the 36.2 ha site in the Draft Site Allocations Development Plan Document as an Economic Hub;  Additional employment land evidence produced on behalf of Leeds City Council (BE Group Assessment of Employment Land Needs for North West Leeds, June 2015), which confirmed the local need for additional employment land allocations close to Leeds Bradford Airport;  An employment land study dated October 2016 produced by Andy Haigh Associates on behalf of Leeds City Region Local Economic Partnership which provided evidence in support of a strategic employment land allocation at Leeds Bradford Airport; and  The identification of the Economic hub in the Leeds City Region Strategic Economic Plan as a Strategic Employment Site.

LBA has published its Masterplan setting out how the Airport will grow including the spatial implications.

The growth of Leeds Bradford Airport is recognised and supported nationally, regionally and locally, as reflected in the Leeds City Region Enterprise Partnership’s (LEP’s) Strategic Economic Plan, the Leeds Transport Strategy (2016) and the Draft Submission Site Allocations DPD document of the Leeds Local Plan.

Public private collaboration can ensure the delivery of maximum benefits

Recent and ongoing consultations between Leeds Bradford Airport, Leeds City Council, Leeds City Region LEP, West Yorkshire Combined Authority (WYCA) and HE institutions have identified a number of opportunities which are being explored:

 The potential for creating an Innovative Technology park to plug an identified gap in the Leeds City Region Land and property offer, to align with the emerging manufacturing strategy of the LEP / WYCA and University;  The creation of a manufacturing hub facility incorporating incubation and innovation facilities as well as conference and training space; and  Creation of Enterprise Zone status to establish both an infrastructure funding mechanism utilising business rates additionality for Tax Increment Financing (TIF) together with occupier incentives geared towards manufacturing firms.

Page 2

1 Introduction Purpose Cushman and Wakefield has been appointed by Leeds Bradford Airport (LBA) to assess and develop its proposals for an ‘Employment Hub’ comprising a mix of predominantly employment uses on land to the north of the Airport. This report updates the previous report produced by us in November 2014 under our former brand DTZ.

Passenger forecasts indicate that LBA is projected to grow significantly over the next 15 years and it aims to become a top 10 UK airport in terms of its passenger traffic. Alongside this, a significant opportunity exists for the Airport to develop a complementary Employment Hub of economic activity. LBA have control of land immediately to the north of the Airport which is identified for the delivery of the Employment Hub.

The Airport’s current landside offer does not match the potential growth projections. Given its growth projections, there is a distinct opportunity to capitalise upon the Airport ‘asset’ and the attractiveness to businesses that an airport location would provide. This could provide a unique employment location within the Leeds City Region that could increase its attractiveness to inward investors and address the current lack of available large strategic commercial development sites across the City Region.

This report has been prepared to update the evidence base in support of the proposed Employment Hub to inform the forthcoming Examination of the Draft Site Allocations Development Plan Document of the Leeds Local Plan and emerging allocation EG3 ‘Leeds Bradford International Airport (LBIA – Employment Hub) of the DPD. Methodology and structure of report Our approach to this commission has involved an assessment of the various drivers that influence the potential for a commercial growth hub at LBA:

 Policy  Economic  Aviation  Commercial

We have then worked alongside WYG and 5plus Architects to devise an indicative land development strategy, development schedule and phasing plan.

An evidenced-based approach has been adopted to ensure a robust assessment of the potential for the hub, drawing on documented evidence of the market for commercial land and floor space within the Leeds area and also reviewing lessons from other comparable airports across the country. We have also consulted senior representatives from the following organisations in the preparation of this report:

 Leeds Bradford Airport  Leeds City Council  Leeds City Region Local Enterprise Partnership (LCR)

Page 3

 West Yorkshire Combined Authority (WYCA)  University of Leeds

This report first outlines the LBA baseline and growth context before assessing the various growth drivers. It then outlines the development potential and makes recommendations on the quantum and mix of development and means of delivery. It concludes by providing an assessment of the economic benefits of the Economic Hub.

Page 4

2 LBA Growth Context

History

LBA is located approximately seven miles to the North West of Leeds City Centre. It opened in 1931 as Yeadon Aerodrome. Domestic schedule flights commenced in 1935 and it served an important role during World War II, with the development of an adjacent military aircraft factory. By the 1950s the airport was running commercial flights to the Isle of Man, Liverpool, Belfast, Jersey, Ostend, Southend, the Isle of Wight and Dusseldorf. In 1953 Yeadon Aviation Ltd was set up to run the flying school and commercial airfield operation but the ownership was transferred to five local councils in 1987 through a limited company with Leeds and Bradford councils each owning 40% and Wakefield, Calderdale and Kirklees sharing the remaining 20%.

Scheduled domestic and European flights re-commenced after the war and these expanded rapidly during the later 1970s/80s as the popularity of package holidays boomed. It was owned jointly by the five neighbouring local authority areas of Leeds, Bradford, Calderdale, Kirklees and Wakefield until 2007, when it was announced that Bridgepoint Capital was the preferred bidder, acquiring the asset for approximately £145million.

Bridgepoint Capital owns the airport outright but the 5 councils hold a 'special share' interest in the airport, to protect the name and continued operation as the major air transport gateway for Yorkshire. The Airport has had a masterplan in place since 2004/05, and Bridgepoint submitted a planning application for a £28m investment programme in late 2008 which was approved in 2009, although the focus of this has principally upon the airside operations to date. The airport had already seen significant improvements made prior to the Bridgepoint acquisition including a significantly enlarged terminal building, a £5m food court refurbishment in 2006 and an £8m development on the south end of the airport with two new hangars, maintenance facilities and executive aviation terminal.

In March 2017, the Airport published an updated masterplan/strategic development plan (SDP) entitled ‘Route to 2030’. This identifies a vision to be an ‘outstanding regional airport, connecting Yorkshire with the world’. The SDP provides an update on investment and growth at LBA since 2005 and sets out a high level strategy for the development of the airport through to 2030. Underpinning the SDP is a clear understanding of the role of the airport in the Leeds City Region (LCR). It reports that LBA contributes £336m to the local economy every year and delivers over 2,350 direct jobs, with considerably more relying indirectly on the success of the airport. The SDP suggests that LBA has in recent years, outstripped the percentage growth of many other UK airports. It exceeded 3.6 million passengers per annum (mppa) in 2016/17 representing a 27% increase in numbers since 2005.

Page 5

Current flight operators

There are 16 airlines and tour operators operating from LBA as listed below:

16 Leading Airlines & Tour Operators o Jet.com o Ryanair o Thomas Cook o Monarch o KLM o Aer Lingus o Super Break o Balkan Holidays o Jet2CityBreaks o flybe o Thomson o Eastern Airways o First Choice o Jet2Holidays o Aurigny o British Airways

The Airport is committed to both working with its existing airlines to expand the available routes and also to exploring opportunities to secure new flight operating companies. The Airport has recently announced that from February it will become one of the first airports nationally to fly direct to Akureyri in Northern Iceland, just 60km from the Arctic Circle. For the Summer 2017 season, Jet2.com introduced new routes to locations such as Berlin, Halkidiki, Naples, Almeria and Girona in addition to Ryanair’s new routes to Warsaw, Gran Canaria, Vilnius and Bratislava.

Flight routes/destinations

The airport offers direct flights to over 75 destinations across the UK and around the world, with connections on to significantly more through the hub airports of London Heathrow, Amsterdam and also Dublin (for flights to the USA). The direct British Airways flight to Heathrow is key to providing onward flights to the rest of the world, to over 150 destinations. Direct flights are largely European-based, although Jet2 does offer direct flights to New York around Christmas. Current key destinations include France, Germany, Italy, Austria, Switzerland and Spain, amongst others. It serves both holiday and business destinations with varying summer and winter timetables.

Page 6

Ownership and management of LBA

The Airport is 100% owned by Bridgepoint Capital, an international private equity group, which acquired the Airport for €214m (£145m) in 2007. Bridgepoint invested £27m to acquire a 24% stake in Birmingham Airport in 1997, disposing of its interest four years later for £84m. It therefore has experience in the aviation sector. As stated, the 5 councils hold a 'special share' interest in the airport to ensure that it remains as an operational airport for the Yorkshire region. The Airport is operated by Leeds Bradford Airport Limited.

Numbers of flights and passengers

In 2016, 3.6m passengers travelled through LBA, representing 1.4% of all air passenger traffic across the UK (excluding the Channel Islands). This placed LBA as the 15th largest airport nationally in terms of passenger numbers, closely behind London City and East Midlands (see table below). Heathrow, Gatwick and Manchester were the three largest airports in terms of passenger traffic, home to 53% of all passenger traffic nationally. LBA experienced a 16% increase in passenger numbers between 2008 and 2013, representing the largest increase of all major national and regional airports across the UK, based on Civil Aviation Authority (CAA) data.

There were a total of 45,627 aircraft movements at LBA in 2013, ranking it 20th across UK airports (see Table 2.1 below).

Page 7

Table 2.1: passenger and aircraft movements (2016 CAA data)

Freight Movements

Freight currently represents a relatively small part of the overall business of LBA however there is the potential for growth. There is considered to be the potential to significantly enhance the freight and cargo operations at LBA, particularly in relation to ‘belly cargo’ on direct flights to locations such as London Heathrow where there is significant capacity for this.

Page 8

Economic output

Based on an economic impact report undertaken by independent consultants (York Aviation) in 2015, the Airport currently contributes in excess of £100m of direct GVA per annum to the Leeds City Region economy and directly employs over 2,300 people, making it one of the largest employers in the City Region. With indirect economic benefits as well (i.e. business connectivity/productivity), its overall impact within the LCR was estimated to be £336m per annum. Numerous businesses are based within the airport site and it supports local employment with over 80% of its employees residing within a 10 mile radius (based on information provided by LBA). It is a major economic asset which provides significant direct and indirect economic benefits to the City Region and beyond.

Current commercial accommodation within the airport boundary

There is currently 29,000 sq m (GIA) of operational built floorspace within the Airport boundary (based on 2010 LBA Rating Schedule). Approximately 22,000 sq m (GIA) of this relates to the main terminal building, which was constructed in 1993 and then extended since, albeit partly through temporary floorspace. Other key buildings on the site include:

Table 2.1: Accommodation on site Building Floorspace (sqm) (GIA) Fire-station 979 Control Tower/Centres 401 Engineering Offices 752 Catering Centre 1,179 Freight Offices 308 Repair Garages 678 Airedale House 376 Electricians Store 137 Transit Sheds 1,081 Fuel Store Offices/Maintenance 166 Boiler House/Substation 137 Aero House Rooms 90 Source: 2010 rating list

A large proportion of the site is occupied, as one would expect, by runways, aprons and taxiways as well as access roads and car parking. The main terminal itself includes the following facilities/uses in addition to standard waiting areas, check-in desks and LBA’s offices:

 World Duty Free  CARGO  WH Smith  Boots

Page 9

 Travelex  Burger King  Saltaire Bar/Eatery  Camden Food Company  Home Bar  Cafe Ritazza  Fat Face  Leeds Rhinos RLFC shop  Leeds United FC shop  Yorkshire County Cricket Club shop  Yorkshire Premier Lounge

A plan illustrating the spatial extent of the current airport operational area is presented below (shaded in turquoise):

Figure 2.4: Leeds Bradford Airport

Growth Plans

The Airport has grown significantly over recent years in terms of passenger numbers and this growth scenario is set to continue. By 2030, the Airport is projecting 7.1m passengers per annum, approximately doubling current passenger numbers. It has the potential to become the largest airport (in terms of passenger numbers) east of the Pennines from Newcastle in the north to East Midlands in the south and to become a top 10 airport nationally. It is seeking to target route development to support priority economic sectors and to reduce the current levels of passenger movement leakage. Its aim as per this latest SDP is to an ‘outstanding regional airport, connecting Yorkshire with the world’. Its objective is to

Page 10

develop a successful airport that fully serves the business and leisure needs of the Yorkshire region and acts as a catalyst for economic growth by:

 Developing a focused route development programme;  Developing high quality airside and landside facilities; and  Developing high quality surface access connectivity.

The Airport is seeking to capitalise upon the growth opportunity that it has and to create a sense of place/destination in its own right at the airport. If it is to achieve this and realise its growth ambitions, there is a distinct need for additional operational and non-operational land and premises.

3 LBA Growth Drivers: Policy Aviation Policy Framework (2013)

The 2013 Aviation Policy Framework replaced the 2003 Air Transport White Paper as Government’s policy on the aviation sector. This acknowledges that the sector contributes around £18 billion per annum of economic output to the UK economy and employs around 220,000 employees directly.

The Government’s primary objective as defined within this policy framework is to achieve long-term economic growth. It recognises that airports are in some ways cities in themselves, creating local jobs and generating opportunities for economic rebalancing in their wider area and fully recognises the vital contribution they can make to the growth of regional economies. The document suggests that many airports act as focal points for business development and employment. The focus is on London’s airports as the largest carriers of passengers, however it identifies that the number of passengers using non-London airports has increased by over a third since 2000.

The Framework identifies that LBA is a “vital contributor to the economy of the Yorkshire and Humber region, and in particular the Leeds City region”. It suggests that the services of the airport and international connectivity will continue to contribute towards improved export activity, performance and business competitiveness. Based on forecast passenger growth at the airport, it is estimated that this will grow to around 8,000 jobs and £290 million GVA by 2030.

The Policy Framework recognises that the scope exists for LEPs to develop local strategies to maximise the catalytic effects of airports to attract business and support growth. It suggests that LEPs, in partnership with local authorities, have a range of tools at their disposal to help support businesses in the vicinity of airports and that the Government encourages airport operators to engage actively with their LEPs to ensure that they are fully integrated into their LEPs’ overall economic strategy for the area, and to maximise the benefits to local economies.

Page 11

The Policy Framework also underlines that nationally a number of Enterprise Zones have been designated around regional airports to support their growth. Examples include Manchester’s Airport City (£600m, 150-acre development which will transform the airport into an international business destination) and the Newquay ‘Aerohub’ (55ha, including aviation related space and more generic commercial employment land). The Enterprise Zone in Cardiff has also been expanded to incorporate the airport.

Leeds City Region Strategic Economic Plan

The Leeds City Region Strategic Economic Plan (SEP) 2016 represents the economic policy document that guides economic development needs across Leeds City Region. This acknowledges that the Leeds City Region is the largest City Region outside of London and that despite its economic strengths and assets, it is not realising its full potential. Its vision is “to unlock the potential of the City Region, developing an economic powerhouse that will create jobs and prosperity”. The SEP sets out a vision to

TO BE A GLOBALLY RECOGNISED ECONOMY WHERE GOOD GROWTH DELIVERS HIGH LEVELS OF PROSPERITY, JOBS AND QUALITY OF LIFE FOR EVERYONE

The SEP identifies 4 strategic investment priorities:

1) Supporting growing businesses 2) Developing a skilled and flexible workforce 3) Clean Energy and Environmental Resilience 4) Delivering the infrastructure for growth.

The SEP identifies a number of key growth sectors where it recognises existing clusters of particular expertise and opportunity:

 Innovative manufacturing  Financial & professional services  Health & life sciences  Low carbon & environmental industries  Digital & creative industries  Transport, Food & drink.

The SEP recognises that the “transformation of the City Region’s local, national and international transport connectivity is central to its plans for growth”. It acknowledges that good international connectivity plays an increasingly important part in promoting trade and attracting inward investment. The SEP identifies that “the City Region benefits from a growing regional airport, which is one of the fastest growing nationally”. It recognises that it has “the potential to deliver much improved international connectivity, benefitting existing businesses and attracting inward investment in our key priority sectors”. The SEP also makes reference to the fact that an improved surface connectivity is a priority and that a

Page 12

better connected airport will help to support the LEP’s key sectors and attract more inward investment. A plan illustrating the SEP’s spatial priorities is included within the document which clearly identifies the Employment Hub as a key strategic employment site.

The SEP identifies the proposed Employment Hub as Leeds Bradford Airport Employment Zone acknowledging the potential of the airport to deliver substantial jobs growth.

Consultation with Leeds City Region LEP and WYCA has further reinforced the appetite of the public sector to realise the delivery of the Employment Hub at the Airport. As part of the refresh of the forthcoming SEP, WYCA are proposing to develop an Industrial Strategy for the City Region putting manufacturing at its heart. It sees the proposed hub as a key opportunity to deliver land and property to drive growth in innovative manufacturing. Discussions with WYCA have also included support for the concept of an innovation centre to stimulate advanced and innovative manufacturing on site.

Leeds Local Plan

The adopted Core Strategy Development Plan Document recognises that LBA is a “major part of the strategic Infrastructure for the City Region and that it is also an economic resource for employment, business development and tourism”. It acknowledges that the airport’s economic benefits stem beyond just the Airport site across the wider City Region and that there is potential for growth in terms of passenger numbers and freight. The Core Strategy also acknowledges that there is ongoing work currently being undertaken by the Airport to define its longer term aspirations, as part of the Airport’s Masterplan. This Masterplan was published in March 2017.

Core Strategy Spatial Policy 9 identifies the need for 493 ha of land for general industrial uses to be allocated across the District. Following a thorough review of site options, Leeds Council identified the need for 36.2 ha of land forming the proposed Employment Hub as a key allocation to meet this need, as set out in the Site Allocations DPD.

The Core Strategy recognises that the Airport provide key components of strategic infrastructure, for businesses, residents and visitors and that it provides a ‘gateway’ to the City Region as a whole. Spatial Policy 12 within the Core Strategy is entitled ‘Managing the growth of Leeds Bradford Airport’ and suggests that the continued development of Leeds Bradford Airport will be supported to enable it to fulfil its role as an important regional airport subject to a number of points, particularly relating to the much needed surface access improvements.

Growth implications for LBA

LBA’s growth is embedded in national aviation policy which also recognises the importance of growing the mix of commercial operations around airports to reinforce their growth potential. It is important that local policies – through both planning and economic development – respond to accommodate the needs of the airport’s expansion.

Page 13

The Local Enterprise Partnership’s vision to accelerate economic growth of the Leeds City Region requires a strong airport with international routes. It also requires a diverse, high quality range of commercial land and property to accommodate its growth needs, including premises and sites for high value operations that are innovation and technology related – an area of property in which Leeds punches well below its weight. LBA Employment Hub can play a key role in this regard by offering a unique selling point that will appeal to occupiers seeking high profile and well connected locations.

The additional powers and resources being committed to LEPs provides public and private sector partners with the ability to be innovative in the way that it can support and facilitate the delivery of economic development projects such as the Employment Hub. Therefore there is an opportunity for LBA to work collaboratively with the LEP and other partners to deliver the vision for an Employment Hub.

Page 14

4 LBA Growth Drivers: Economic This section presents an analysis of the current economic position and performance of the Leeds City Region economy. It draws upon a number of published secondary data sources to provide an overview of the local economy as context for the growth ambitions of the Airport, located at the geographic heart of the City Region. Data has been used to show how the Leeds City Region performs against regional and national benchmarks to enable comparison, largely based on data extracted from the NOMIS database, drawing on ONS and other key data sources.

The Leeds City Region (LCR) comprises ten local authority areas including Leeds, Bradford, York, Kirklees, Barnsley, Wakefield, Selby, Calderdale, Harrogate and Craven. The City Region’s economy is worth £54bn per annum (5% of the national Gross Domestic Product). The LCR is widely regarded as the largest financial and legal centre outside of London and the City Region claims to have more company HQ’s than any other LEP area in the north of England. The City Region markets itself on the fact that it is home to world leading companies and universities, as well as some of the most beautiful physical landscapes in the country – it comprises a diverse mix of urban and rural land uses.

Population and demographic trends

The most recent Office of National Statistics (ONS) Population Estimates indicate that 3.05 million people were resident within the Leeds City Region in 2016. The population of the Leeds City Region represents over half (56.1%) of the Yorkshire and Humber Region’s total resident population (5.42 million people).

Between 1995 and 2016, the population of the Leeds City Region increased by 11.4%, a higher rate of growth than the wider regional Yorkshire and Humber rate of 9.4% but lower than the national rate of 14.2% (ONS, via Nomis).

Working Age Population and Projected Growth

The 2016 ONS Population Estimates indicate that 1.91 million people of working age (16- 64) reside within the Leeds City Region, representing 63% of the total resident population. This is broadly aligned with regional and national average percentages.

At the national level, working age population growth of 3.5% is anticipated over the decade to 2030. A lower growth rate of 1.7% is projected at the Leeds City Region level, which exceeds the 0.1% anticipated across the wider Yorkshire and Humber region (2016 based ONS population projections.)

Page 15

Economic Activity

It is not just the size of the working age population that determines the scale of the local labour market, but the extent to which the working age population is economically active. Economic activity is defined as those in employment (or self-employment) or those that are unemployed but available for work. The economic activity rate represents the extent to which the working-age population is engaged with the labour market and indicates the absolute scale of the labour force from which organisations can source employment. Limits to the size of the resident labour force result in in-commuting and/or inhibit economic growth.

Economic activity rates within the Leeds City Region broadly are currently at 77% of the working age population which slightly exceeds the wider Yorkshire and Humber rate of 76% but is lower than the national rate of 78% (based on 2017 Annual Population Survey).

Occupation

The occupational structure and characteristics of a City Region’s resident labour market is central to its overall competitiveness and shapes the economic opportunities that residents are able to access. In turn, the type of skills implied by an area’s occupational structure can shape the economy’s ability to attract and support higher-value economic activity and attract higher skilled non-resident workers into the economy.

Figure 4.1 illustrates the resident occupational structure of the Leeds City Region, compared with wider regional and national benchmarks. This illustrates that 42.1% of employees within the Leeds City Region are employed in the top three occupational groups This is higher than the Yorkshire & Humber (40.5%) averages but lower than the 45.8% national rate.

Page 16

Figure 4.1: Occupational structure of those in Employment 2017

Source: Annual Population Survey 2017

Qualifications

Central to the long-term growth capacity and productivity of any economy and the ability of the City Region to improve its occupational structure are the skill levels and educational attainment of the resident labour market.

At 10.1% of the working age population, the Leeds City Region has a higher than average proportion of people with no formal qualifications compared to the national average of 7.8% and the regional average of 9.5%. This implies the need for enhanced skills development within the City Region to drive economic competitiveness. 31.3% of the LCR’s working age population are qualified to NVQ 4+ (degree level or above) which is in line with the regional figure but much lower than the national average of 37.9%, suggesting the need for a focus on higher level skills attainment (based on 2016 Annual Population Survey).

Page 17

Business Births and Survival Rates

The volume of business start-ups (births) and survival rates are commonly used as proxies for levels of entrepreneurship. The Leeds City Region experienced a growth in business stocks (0.9% in 2011 and 0.3% in 2012) above that of the regional Yorkshire and Humber rates (0.4% in 2011 and -0.1% in 2012). This growth was, however, below the national growth rates of 1.4% and 0.7% respectively.

The below table indicates that there were 11,570 new business births within the Leeds City Region in 2007. In terms of business survival rates between 2007-12, the year 1 survival rate of businesses within the Leeds City Region was 95.6% in year 1, which was higher than regional and national averages. At year 5, it was 42.8%, which was higher than the regional average but lower than the national average.

Table 4.1: Five Year Business Survival Rates (2007-2012)

Busine Survival Rates ss 2 3 4 5 Births 1 Year Years Years Years Years (2007) Leeds City Region 11,570 95.6 78.8 60.9 50.0 42.8 Yorkshire and 20,385 94.4 78.2 60.1 49.1 41.9 Humber Great Britain 274,770 95.4 81.2 63.0 52.0 44.6 Source: ONS Business Demographics 2012

Employment Sectors

An analysis has been undertaken of a number of key employment sectors within the Leeds City Region, compared with the national picture. This identifies that there are a higher proportion of the workforce employed in the following sectors in the Leeds City Region compared with England as a whole:

 Manufacturing (10.5% compared with 8.1% nationally)  Education (10.1% compared with 9.2% nationally)  Health (13.4% compared with 12.8% nationally)  Business administration (10.2% compared with 9.1% nationally)

(Source: BRES, 2015)

A report recently produced for the Leeds City Region Secretariat by Ekosgen (February 2014) has examined the sector strengths of the local economy. It reviewed the level of specialisation and growth across all standard economic sectors to identify recommended priorities for the Leeds City Region to invest in. The report concludes that the following sectors should be prioritised by the Leeds City Region for development and investment:

Page 18

 Financial, professional and business services  Advanced manufacturing  Health and bio-science  Creative and digital industries  Food and drink  Low carbon industries Table 4.2 below illustrates the various sector strengths which include significant strengths in a number of sectors which have international markets and a research and development focus.

Table 4.2: Leeds City Region Sector Strengths

Leeds City Region Sector Performance

Employment (numbers) Employment (specialism) Gross Value Added

Education Manufacture of textiles Wholesale Retail Manufacture of beverages Retail Health Water collection, treatment and supply Electricity, gas etc Public administration Manufacture of furniture Specialised construction ExportingFood and beverage Potential service Inward investmentPrinting / recorded Research media Strengths ManufactureNational Innovation of food potential Priorities

Financial services Financial services Agri-science Bio-science HighEmployment-tech goods Growth (%)intelligence ProductivityAdvanced materials AdvancedGVA Growth materials Communication Health innovation Big Data ICT Professional services Electricity, gas etc Finance Construction services Advanced digital Regenerative medicine Healthcare Computing and informationtechnologies Air transport Real estate Education Robotics Energy Administrative and support PowertrainRental & precision and leasing Retail Satellites High value services engineeringTelecommunications Wholesale manufacturing Land transport De-carbonisedManufacture energy of basic pharmaceuticals Professional services Media activities and renewables

Source: Key Sectors Policy for Leeds City Region Draft report by Ekosgen February 2014

The LCR LEP published its 2016 Economic Assessment in 2016. This identified the following in relation to the LEP’s key sector and cluster strengths:  Heart of the UK’s advanced manufacturing and engineering industry  The UK’s largest centre for financial, professional and business services outside London  A strong low carbon sector and energy generation capacity  High quality life sciences and related industries, particularly biosciences and healthcare/medical technologies  Leading digital technology companies  A diverse food & drink sector  A network of strong local clusters in the creative and cultural industries; and a strong tourism/leisure/cultural sector

Page 19

 An attractive location for the logistics industry at the heart of UK rail and motorway networks. The Economic Assessment specifically identifies LBA as a key asset for improving economic performance, suggesting that continued passenger growth alongside the proposed employment zone that could support thousands of new jobs.

Summary of the economic challenges/opportunity

The above identifies the following economic challenges/opportunities across the Leeds City Region which the proposed Employment Hub could address/capitalise on as a critical economic asset, building upon the existing profile and operations of the Airport itself:  A significant and growing population, particularly of working age  Need to drive a shift towards a higher value occupational profile through the provision of high value employment opportunities  Linked to the above, a need to promote skills and qualification attainment, particularly at the higher end (NVQ3/4+)  Need to support new business start-ups, innovation and enterprise to drive economic growth  Key economic growth opportunities in sectors such as health/life sciences, low carbon, digital and advanced/innovative engineering/manufacturing. The LCR has a competitive advantage in a number of these sectors.

Education

The LCR is home to 9 Higher Education institutions (universities) and 14 Further Education Colleges, accommodating a total student population of around 230,000. Universities include the University of Leeds, University of York, Leeds Metropolitan University, University of Huddersfield, Leeds Trinity University, University of Bradford and University of York St John (HE offer also includes Leeds College of Art and Leeds College of Music). In total, these produce in the region of 40,000 graduates every year. The Universities of Leeds and York are members of the White Rose University Consortium, which together rank alongside Oxford and Cambridge in terms of research capabilities.

The below table presents the rankings of each of the universities based on 3 recent nationally recognised assessments – there are 120 universities nationally and the lower the ranking the better. The assessments are based upon a wide range of criteria from academic and research and research performance through to student experience. As can be seen from this, both the University of York and the University of Leeds are ranked within the top 25% nationally.

Page 20

Table 4.3: University rankings

Complete University Times UK rank 2017 Guardian UK rank Guide 2017 2017 University of 14 20 17 Leeds University of York 20 18 14 University of 72 64 60 Huddersfield York St John’s 122 119 University of 58 64 75 Bradford Leeds Trinity 112 114 Leeds Beckett 121 64 111

Leeds University has for some years been ranked second nationally in terms of the number of student applications it receives. It was also ranked in the top 10 nationally in the 2008 Research Assessment Exercise in terms of the quality of its research.

It operates 8 faculties including Arts, Biological Sciences, Business, Education, Social Sciences and Law, Engineering, Environment, Mathematics and Physical Sciences, Medicine and Health. Its Biological Science Faculty is home to over 2,400 students and has a £53m research portfolio. In the last government Research Assessment Exercise (RAE) 2008, the University was ranked 4th for biological sciences in the UK. Its Faculty of Medicine and Health also hosts the Biomedical and Health Research Centre (BHRC) - a strategic partnership between the four science Faculties of the University of Leeds and the Leeds Teaching Hospital NHS Trust and Collaborative Research Centres in Epidemiology and Biostats, Cardiovascular Disease, Musculoskeletal Disease and Obesity, Nutrition and Heath.

Leeds Teaching Hospitals NHS Trust is the largest in the UK, treating over a million patients a year with a budget of £789 million and a workforce of over 14,000. St James’s University Hospital, part of the Trust, is the largest teaching hospital in Europe. It houses the landmark £220 million Yorkshire Cancer Centre, opened in 2008, the largest of its kind in Europe. The City Region also comprises the York Biocentre, the Bioincubator at Leeds Innovation Centre and Bradford Bioincubator, which together provide 9% of all dedicated bioincubator space in the UK.

The University of York was ranked as the 8th best research institution in the UK (RAE, 2008) and is home to 16,000 students.

We previously engaged with all 3 Leeds-based universities as part of this work to understand more about their academic and research strengths and have recently re-engaged with the University of Leeds. The University of Leeds has strengths in several key sectors which are being targeted in respect of innovation:

Page 21

 Health / bio science  Water  Energy  Future Cities  Food  Culture  High Speed Rail Engineering (new department)

The University has expressed the view that there is an inadequate supply of sites and premises in Leeds to accommodate research and development businesses emerging from its campus, and that as a result there has been a leakage of occupiers to other cities/city regions. The University currently generates around 50 business start-ups/spin outs per annum. The University is underway with the development of Nexus, a £40m new innovation facility on its campus site off Woodhouse Lane in Leeds. This will accommodate around 60 new high growth businesses in a mix of laboratory and office space and is due to reach practical completion in September 2018. It will focus on a range of high value sectors across health/life sciences, engineering and environmental technologies, with a distinct focus on data. The University is already exploring potential grow on facilities and manufacturing space for businesses that could stem from this. Even with the completion of Nexus, there is reported by the University to be a continued lack of laboratory grow on space within the City and no physical space on the University campus to accommodate this. The proposed Employment Hub could provide this type of space in an environment which could be highly attractive to prospective occupiers.

Leeds Beckett University has a number of sector strengths in sport, business, law, finance, music and the arts. Together with Leeds Trinity University, there could be opportunities for off campus innovation facilities in a high profile airport business park location.

Growth implications for LBA

The LCR is one of the highest performing regional economies in terms of labour market performance and growth. Its position as the largest city regional economy outside of London contrasts unfavourably with the airport’s status as 15th biggest airport; the growth of the economy in the future will drive the potential for growth of the airport and vice versa.

Of particular significance to the Airport Employment Hub vision is the fact that the city region has strengths in a number of economic sectors which will drive demand for commercial land and floor space and present opportunities for the hub. Key growth sectors include professional/financial services, advanced manufacturing, health and bio-science, creative and digital industries, food and drink and low carbon industries. Many of these sectors will benefit from high profile well connected locations such as the Airport where being at the ‘front door’ to the city region assists connections with suppliers, parent companies, and clients. Evidence from UK and abroad demonstrates there to be a healthy appetite from occupiers to locate close to airports.

Page 22

Our analysis of the R&D sector reveals a particular opportunity for more land and premises to meet demand. The University of Leeds has confirmed the leakage of many of the businesses that emerge from campus as a result of a lack of suitable premises. LBA can offer a unique location for accommodating this potential demand.

5 LBA Growth Drivers: Aviation

Demand for commercial land and premises

The airport is projecting an increase in its passenger numbers from 3.6m passengers per annum at present to 7.1m passengers per annum by 2030. This significant growth in passenger numbers will require the airport to expand its footprint and will drive demand for additional land and premises across three key areas:

 Core operational requirements – to meet the growth ambitions, there will be a need to increase the capacity of the passenger terminal and other associated operational facilities such as aprons, taxiways, hangars, baggage handling, fuel stores and maintenance facilities. As a result there will be an additional demand for land and floor space displaced due to the expansion of the airport

 Non-operational ancillary commercial land/floorspace requirements – there will be a need for additional land and floorspace for additional/expanded flight operating companies (crew facilities/office space/maintenance facilities), catering organisations, ground handling facilities (e.g. Swissport) and others such as flight training/skills development facilities (i.e. the Aviation Academy/Multiflight etc). There is an opportunity for the Airport to develop its freight/cargo operations which would have implications for the need for additional cargo/freight handling facilities, transit sheds and distribution facilities.

 Supply chain related requirements (aviation businesses / occupiers) – as the airport expands there is the potential for it to attract occupiers in the aviation sector which have a preference to be located in close proximity to the airport. These may include for example, aircraft component manufacturing/supply businesses, freight forwarders, which typically seek to locate adjacent to airports.

Benchmarking comparable airports

In our 2014 report, we undertook a comprehensive review of a number of comparable regional airports elsewhere across the UK to understand more about the extent of their spatial footprint and the extent to which they have either current or planned commercial floorspace either within or in close proximity to the airport boundary. We have undertaken an update of this as per table 5.2 below. In summary, key comparable UK regional airports include the following:

Page 23

 Newcastle Airport – accommodates 7,000 sq m Freight Village (with expansion land) and the Airport Industrial Estate is located 3 miles from the Airport, comprising c.18,000 sq m of light industrial floorspace. There are 7 hotels within a 2.5 mile radius of airport.

 Liverpool John Lennon Airport - TNT distribution facility on a 1.6 ha (4 acre) site to the east of terminal. An expanded cargo and maintenance facility is planned adjacent to the airport of around 7 ha. Liverpool International Business Park is a 157 acre (62 hectare) site situated adjacent to Liverpool John Lennon Airport. Planning consent has been granted for B1/B2/B8 uses on the site and buildings ranging from 50,000 sq. ft. (4,645 sq. m.) to 500,000 sq. ft. (46,452 sq. m.) can be accommodated. 35 acres of development land is currently being marketed. Estimated to be circa 340,000 sq m (3.5 million sq ft) of mixed office, industrial, warehousing and commercial leisure accommodation within 2 km (1.2 miles) of JLA when these sites are fully built out (including existing local employment sites). 4 hotels immediately adjacent to airport.

 Bournemouth Airport - the Aviation Park is adjacent to the Airport, comprising a mix of technology, industry and freight uses across 80 hectares (200 acres) of land and buildings allocated for employment use. It provides approximately 150,000 sq m of business space being developed by the owners of the airport. There are plans to develop a further 50,000 sq m of employment space on this site (outline consent secured).

 East Midlands Airport – home to 17,000 sq m of cargo floorspace and a further 66,000 sq m of commercial floorspace owned by the Airport on site. The Pegasus Business Park is located adjacent to the Airport and comprises 26 ha of land (10 ha remain undeveloped) and a total of 20,000 sq m of B1 floor space. Plans to bring forward the remaining 10ha at Pegasus for office, logistics, general warehousing and hotel uses. Land to the south of the Pegasus Business Park, has been identified as potential employment land. Land has also been reserved for the further development of the DHL Hub building at Cargo West and land will also be safeguarded for a second major integrator hub in Cargo East. Plans are also being developed to deliver a rail freight terminal capable of providing up to 600,000 sq m of B8 floorspace. 4 hotels immediately adjacent to airport

 Aberdeen Airport - Existing cargo facilities on the airport site occupy 2,400 sq m of floorspace. Adjacent to the Airport are two well established industrial estates with a number of large oil/gas company occupiers. Also adjacent to the Airport is the 54 acre ABZ Business Park, with outline planning consent for a mix of office, industrial and hotel uses. Also in close proximity to the Airport is the D2 Business Park with outline planning consent for 100,000 sq m of office/industrial/ancillary employment uses. Adjacent to this is additional land allocated for employment or HE/research use. 6 hotels within close proximity of the airport

Page 24

In summary, it is evident that all 5 of these comparator airports have either an established or pipeline supply of employment land adjacent to their operational boundaries as well as cargo/freight handling facilities within the airport boundaries. In terms of adjacent commercial employment land, Bournemouth has an 80 ha employment site, Liverpool a 62 ha site, Newcastle a 50 ha site, East Midlands a 26 ha site and Aberdeen a 22 ha site. These are all dedicated business parks that are being developed and marketed on the back of their proximity to the airport assets.

Page 25

Table 5.2 Summary of benchmark airports across the UK

Airport Passenger Cargo Movements Airport Existing employment uses Planned/pipeline employment uses Numbers (tonnes) Operation within/adjacent to Airport within/adjacent to Airport (million) al Area 2016 Projecte 2016 Projecte d (2030) d (2030)

Newcastle 4.81 8.50 4,574 Growth 374 ha  7 hotels within 2.5 mile radius  Newcastle International Airport Business planned  Freight Village – 7,000 sqm Park – 50 hectares owned by the Airport –  Airport Industrial Estate (3 miles from up to 1m sqft of commercial development the Airport). (allocated in emerging Local Plan). Designated Enterprise Zone site. Phase 1 for 16,257 sq m (175,000 sqft) of B1 Grade A floorspace has outline planning consent. Marketing currently on hold.  Freight Village expansion land East 4.65 10.0 300,10 618,000 445 ha  17,094sqm (184,000sqft) cargo  East Midlands Gateway Strategic Rail Midlands (2040) 1 tonnes floorspace Freight Interchange – a scheme is already (excludi (2035)  Further 66,000 sqm of commercial underway to deliver a rail freight terminal ng and floorspace owned by airport let on capable of providing up to 6m sqft of B8 mail) 700,000 ground leases. Over 100 tenants in floorspace (development consent granted tonnes total at Airport by the Secretary of State in January 2016 (2040)  Pegasus Business Park - in the south and enabling works are underway) (excludin west corner of the airport site. 26  Pegasus Business Park has an extant g mail) hectares, of which 10 remain planning consent for business park undeveloped. Existing development development including hotels and includes 25,000 sqft Regus building, conference centres – 10 hectares to be PWC Office, National Grid developed. Commercial development  4 hotels proposals associated with the airport will be

Page 29

brought forward for sites within the Pegasus Business Park. These uses will include offices, logistics, general warehousing and hotels.  Land to the south of the Pegasus Business Park, has been identified as potential employment land Liverpool 4.78 12.3 270 220,000 186 ha  TNT invested £6 million in the  An expanded cargo and maintenance (2030) tonnes provision of a new large distribution facility is planned adjacent to the airport of (2030) facility on a 1.6 ha (4 acre) site to the around 7 ha to handle forecast growth of east of terminal. cargo to around 40,000 tonnes pa  Hotels - Crown Plaza, Hampton by  Liverpool International Business Park is a Hilton (on site), Holiday Inn Express, 157 acre (62 hectare) site situated adjacent Premier Inn to Liverpool John Lennon Airport. It is being delivered by the Peel Group. Planning consent has been granted for B1/B2/B8 uses on the site and buildings ranging from 50,000 sq. ft. (4,645 sq. m.) to 500,000 sq. ft. (46,452 sq. m.) can be accommodated. Current occupiers include B&M and Prinovis. 40 acres of development land is currently being marketed. Aberdeen 2.96 5.1 5,731 9,200 215  Existing cargo facilities occupy  Additional developments at ABZ Business (2040) (excludi (2040) approximately 0.8 hectares of land, Park as opposite gn including 1,600 sqm of warehousing.  D2 Business Park – outline planning mail)  DHL also have an 800 sqm cargo consent for 1.4m sqft of facility to the south of the main office/industrial/ancillary employment uses terminal. adjacent to the Airport. Existing occupiers  Existing hotels include a Thistle Hotel, include BP (125,000 sqft), Emerson, ASCO Premier Inn, Courtyard by Marriott and and Hampton by Hilton. 40 acres were sold Speedbird Inn, all on the airport site. to Aker ASA to develop a new 390,000 sq.ft.

Page 30

Adjacent to it is the Menzies Dyce HQ for Aker Solutions with expansion land. Hotel (209 rooms) and the Aberdeen 20 acres of development land remains. Air Hotel.  Adjacent to the Airport is the Kirkhill Industrial Estate to the west and Wellheads Industrial Estate to the east. These are both well-established industrial estates with a number of major oil/gas company occupiers  Also adjacent to the Airport is the 54 acre ABZ Business Park. Bournemo 0.67 4.5 Data Assumes 366 ha  The Aviation Park is adjacent to the  In 2012, MAG Developments unveiled a uth (2030) not current Airport, comprising a mix of ten-year masterplan vision for the availabl level technology, industry and freight uses development of 540,000 sqft of new e maintain across 80 hectares (200 acres) of land business space – including offices, ed and buildings allocated for industrial units, warehousing and employment use. It provides c.1.6m sq distribution facilities, and aviation uses such ft of business space, supports over as hangars. MAG Developments has 200 businesses and around 2,500 already secured outline planning permission jobs. It comprises offices, industrial for the project – granted December 2011 – units, distribution, hangars and to deliver a range of quality new business workshop sites, with a mix of both premises and commercial space, split aviation and non-aviation related across five separate plots, totalling around occupiers, which are generally 35 acres. attracted by the prestige of being based at the airport. It is owned and operated by the Manchester Airport Group, the owners of the Airport. It includes a Basepoint Business Centre.

Page 31

6 LBA Growth Drivers: Commercial In this section we examine the commercial potential of the Employment Hub through providing an assessment of the mainstream industrial and office commercial markets operating in Leeds. We have examined the market for land and premises across each sectors at both the local LBA and wider Leeds levels.

The Leeds office market

Leeds is one of the UK’s largest regional office centres with particular strengths in the financial and professional service sector. It is home to a number of major banks and accountancy firms and is one of the most important legal centres outside of London. The size and strength of the labour market drives demand for office floor space from a wide range of sectors and occupier types and the City has a healthy out of town, as well as City Centre office market.

Recent market conditions saw a number of large requirements in the market for Grade A office space which total in excess of 46,450 sq m (500,000 sq ft), coupled with the Government Property Unit (GPU) requirement and a flurry of upcoming lease events within the city centre should lead to a significantly improved take up in 2017. 2016 saw a number of developments which have performed well with lettings on MEPC’s Wellington Place. MEPC have further demonstrated their confidence in the Leeds office market by speculatively developing out 11,148 sq m (120,000 sq ft) at No. 3. This is due for completion in December 2017 and is expected to attract pre letting interest.

The South Bank area of the city centre is identified as the natural growth for the city centre and there is progress being made by Vastint at the Brewery Wharf site and CEG and Carillion at the Temple Quarter that will have a major impact to the growth of the city centre’s emerging South Bank district.

As figure 6.1 below shows, there a gradual increase in take up in the City Centre office market from 2010 onwards with a peak in 2013. 2014 saw a decrease in take up, taking accounting for the level of floorspace delivered the year before. The recent BREXIT announcement created uncertainty in the market resulting in a fall in office take-up in 2016, coupled with a lack of lease events in 2016 resulted in a below average annual take up volume of 39,947 sq m (430,000 sq ft).

The Leeds office market saw a below average quarter for office take up, marking the end of a uncertain year for the city. The Outlook for 2017 remains promising with the continuation of speculative development with the announcement of the GPU requirement and the out of town office market. Leeds has a strong development pipeline with 67,073 sq m (722,000 sq ft) of office floorspace to complete over the next two years.

As demonstrated in figure 6.1 the long term average for the city is 47,000 sqm (505,000 sqft). Figure 6.2 shows a similar pattern for the out of town market within the last 3 years with a long term average over the last 10 years of 29,377 sqm (316,600 sq ft ).

Page 34

Availability has been in a period of decline as a result of the lack of development activity with the level of Grade A premises on the market falling to circa 20,000 sq m (215,000 sq ft), less than half a year’s supply.

The development pipeline has responded. For example, No. 3 Wellington Place (120,000 sq ft) is under construction and due for delivery in December 2017. Vastint have put in outline planning application for a mixed used development in the Southbank area of the city centre, which will offer 85,003 sq m (915,000 sq ft) of commercial space.

Figure 6.1: Leeds City Centre Take up

Leeds City CentreTake Up 80,000 70,000 60,000 50,000 40,000

Sqm 30,000 20,000 10,000 -

Year

Page 35

Figure 6.2: Leeds Out of Town Take Up

Leeds Out of Town Take-Up (Sq m) 50000 45000 40000 35000 30000

Sqm 25000 20000 15000 10000 5000 0

Year

Looking at the future supply of land for office development in the City, there are a number of major office schemes proposed as illustrated in Table 6.1 below. Within the City Centre, the remaining development parcels at Wellington Place represent the most significant scheme in the pipeline with approximately 10,000 sq m still to be built out. In the out of town market, there are three major sites, with Thorpe Park offering land for over 10,000 sq m of office floor space and Leeds Valley Park almost 10ha. The first phase of office development Kirkstall Forge is now complete underlining the potential for new out of town office schemes in good locations.

Page 36

Table 6.1: Proposed office developments

Office sites Acres Ha Sq ft Sq m

City Centre Wellington Place 0 943,000 87,608 Yorkshire Post Site 5 2.02 300,000 27,871 Lattitude 2 0.81 375,000 34,839 City Square House 175,000 16,258 Whitehall Riverside 500,000 46,452 Quarry Hill 685,000 63,639 Vastint 915,000 85,006 Tower Works Phase 2 130,000 12,077 Oakapple Commercial 145,000 13,471

Out of town Thorpe Park 1,200,000 111,484 Kirkstall Forge 300,000 27,871 Leeds Valley Park 24 9.71 Total 5,668,000 526,575

However whilst these schemes may appear on the surface to ‘buy’ the City a substantial years’ supply, given the scale of annual take up, they may soon be exhausted. In strategic planning the future market there is a need to consider the next wave of office schemes to ensure there is enough of the right quantity and quality to meet market requirements.

The Leeds City Council Employment Land Review 2010 Update provides an assessment of the requirements and availability for land for office use over the period 2010-2028. It concludes that there is a requirement for 880,000 sq m of office floor space, against a committed pipeline (i.e. permissions with planning consent) of 706,250 sq m, leaving a residual need for new land allocations to accommodate 173,750 sq m, as illustrated below:

Page 37

Figure 6.3: Leeds office requirements versus projected availability / shortfall (sq m)

1000000 900000 800000 700000 600000 500000 400000 300000 200000 100000 0 Total requirement Planning pipeline (sq m) Shortfall 2010-2028 (sq m)

Source: Leeds Employment Land Review 2010 Update (Leeds City Council)

In summary, office market fundamentals in Leeds are robust and the scale of demand year on year is such that Leeds needs to bring forward new development opportunities in both in and out of town locations to meet long term market requirements, underlining the potential of Leeds Bradford Airport.

LBA office market

There is a modest local office market operating in close proximity to Leeds Bradford Airport, with a small number of well occupied office parks:

 Airport West, Lancaster Way – modern purpose built business park located off A658 Harrogate Road opposite the White House Lane entrance to the airport  Moorfield Business Estate located immediately to the south of the Airport on the west side of A658 Harrogate Road, comprising a mix of office and industrial accommodation  Aireview Court on the A65, period renovation multi occupancy premises  Rawdon Park, Green Lane, purpose built offices

Airport West is the most significant of these, a scheme delivered close to the peak of last property cycle. The scheme was developed by Rushbond with the first two phases of the scheme completed in 2007 comprising 6,900 sq m (75,000 sq ft) across seven buildings. A further 2,480 sq m is proposed as part of Phase 3 with Phase 4 recently being implemented as a pub/restaurant.

These office premises cater for a wide range of occupiers including professional services, IT/media, airport related. Occupiers at Airport West include Nunwood Consulting (a management consultancy), Towergate Risk Solutions (insurance brokers), WLP (digital media company), Westgate Properties (property consultancy).

Page 38

There has been a regular churn of occupiers and new lettings in recent years resulting from the relocations both within and from outside the local area. The CoStar Interactive database recorded a number of building lettings and sales in the last three years, as illustrated in Table 6.2 below, indicating a healthy demand for property on a leasehold and freehold basis. Transactions have been predominantly at the smaller end of the size spectrum with lettings typically 500 sq m (5,400 sq ft) and under.

Over the period 2007-2016, there has been an average of 1,593 sq m (17,151 sq ft) of floor space transacted per annum, equating to a total floorspace take up over the last 10 years of 15,933 sqm (171,508 sq ft)

Table 6.2: Office transactions 2014-2017 within a 2 mile radius of LBA (source CoStar)

In respect of availability, according to CoStar there is currently approximately 5,560 sq m (59,845 sq ft) of office floor space available on the market in the local area. The existing properties are generally small in size and second hand.

Table 6.3: Existing Availability of office property within 2 mile radius of LBA (CoStar)

The existing office market at Leeds Bradford Airport demonstrates an average take up of 1,593 sq m (17,151 sq ft). Based on current availability of 5,560 sqm there is approximately 3.5 years supply of office floorspace in the local area.

Page 39

Regional industrial market

The West Yorkshire industrial market is characterised generally by a falling supply and pent up occupier demand as a result of a general lack of development activity in recent years. The market has been driven by logistics with the continued growth in demand for distribution locations, with growth in demand for a range of unit sizes. Key recent lettings in the area relate to Amazon and John Lewis at the Leeds Enterprise Zone.

The market is dominated by the Motorway corridors of the M62 and M1, although the majority of occupier demand to some extent is to the east of Bradford, to the west the limited availability of serviced sites means it is untested. The key industrial locations within the Yorkshire region are the Leeds Enterprise Zone, Wakefield and Castleford/Normanton in what is known as the ‘golden triangle’, located within close proximity to the M62, A1 and M1.

In Yorkshire, the majority of occupier activity has been at the smaller end of the market, and in particular activity has been characterised by retailers and third party logistic companies acquiring space in smaller hubs in better locations, in order to support the last mile logistics model.

Despite an overall increase in availability (7%), grade A has fallen by 22% since December 2016 and left occupiers looking for better quality space with limited options. Demand for industrial property across the region remains strong, as a lack of good quality space, in most size ranges, continues to be the principal driver in the occupier market. The development market has been traditionally dominated by design and build schemes with a pre-let in place. Speculative development is limited and often underwritten by public sector incentives, as at Leeds Enterprise Zone. There have been some genuine speculative development schemes including Wilton at Aire Valley and St Modwen at Doncaster and Verdion at iPort and Newhall Business Park located on the M606 by Frank Marshall Estates.

Developers have responded to the grade A supply shortage in the sub 100,000 sq ft market with 45,650 sq ft set to be developed at Gateway Trade Park, Haworth Estates / Evans Group declaring 150,000 sq ft of spec development at Gateway 45 (formerly Temple Green) and Wilton Developments announcing their intentions to commence 76,000 sq ft of spec development at their Latitude scheme, having already committed to a speculative scheme of 80,000 sq ft at Kinetic 45 in East Leeds.

We are continuing to see rental growth across the region in the industrial and logistics markets. Prime rents for new build industrial properties in Leeds now stand at £6.50 – £7.00 per sq ft for grade A industrial space below 20,000 sq ft (and for much smaller units higher rates are being achieved) and £5.50 – £6.00 per sq ft have been achieved for new buildings between 20,000 sq ft and 50,000 sq ft. The secondary industrial market in the 20,000 - 50,000 sq ft category has also fared well, with recent transactions at adjacent units to the subject property including RSL Steeper recently taking 52,629 sq ft and Troy Foods taking 46,462 both at £5.25 psf on five year term certain.

Page 40

To date the market has displayed a degree of resilience to the uncertainty created by the EU referendum and with the exit from the EU there remains a cautious approach in the development market in particular.

The growth of online retail is continuing to drive the ‘big box’ market and there is strong demand from retailers requiring large distribution units of over 9,300 sqm (100,000 sq ft) on well located sites. However, there are 2 available units of over 12,000 sqm (130,000 sq ft) on the M62 in Wakefield that were built speculatively and which remain vacant. The growth in e-commerce is also driving the ‘last mile delivery’ model and requirements from distribution businesses for units that are in close proximity to the motorways and urban conurbations. There are a lack of available Grade A distribution/manufacturing units in the 2,700-9,300 sqm (30,000-100,000 sq ft) range as a result of continued occupier demand and a lack of new development. Development has only really come forward where the public sector has played an enabling role, albeit there are exceptions to this and it is anticipated that there will be further speculative development coming forward in strong market locations (e.g. Latitude 2).

There are a number of large scale serviced sites around the Leeds/Normanton/Wakefield areas (accounting for the Leeds EZ sites) which are likely to absorb much of the demand for larger distribution units (as well as smaller manufacturing units) although there is a lack of available serviced sites to the west of Leeds along the M62 Corridor. There is an opportunity for the M62 Corridor EZ sites to meet the demand for units at the 100,000 sq ft level and the sites should provide a range of manufacturing and distribution unit sizes within the 0-100,000 sq ft range (depending upon the specific site location), with a range of flexible plots and buildings to meet occupier demands across the 30,000-80,000 unit sizes specifically. It will also be important to ensure there is an appropriate supply of available accommodation at the sub-20,000 sq ft and sub-10,000 sq ft unit size range.

Despite lower national take-up figures, take-up in Yorkshire and the Humber reached 4.2m sq ft in 2015, the highest recorded since 2009. An enormous 58% of this is attributed to a very strong Q1, which was the strongest quarter on record for the region.

Those occupiers that have remained active have tended to be the ones seeking the highest quality buildings. Consequently the proportion of Grade A take-up in 2015 was the highest on record, accounting for 47% of all take-up. Build-to-suit deals accounted for around half of Grade A take-up in H2 2015. Given that the cited reasons for taking higher quality space will continue to be relevant we expect the higher proportion of Grade A take-up in 2017.

The growth of online spending means that e-retailing is now the most influential sector for the UK industrial market, with retailing accounting for 37.9% of total take-up in 2015, the highest since 2010. Amazon was by far the most active occupier in 2015, taking up 12 buildings over 50,000 sq ft in size across five regions totalling 2.9m sq ft. Much of this wide ranging activity is to accommodate Amazon’s “same day delivery” service and last mile logistics. Amazon continued their aggressive expansion plans in 2016 with the recent

Page 41

acquisition of 1.2 million square foot at Verdions’ iPort scheme at Doncaster and a mandate for the next 12 months rumoured to be to acquire 10 million sq ft.

There is a supply shortage of large grade A industrial and logistics stock in the region due to the flow of the development pipeline halting over the course of the economic downturn in 2007. The shortage of supply and renewed confidence in the economy and market over the past two years have pushed a handful of developers to begin speculatively building properties to fulfil the gap in supply.

Leeds employment land market

The above charts provide details of the take up and availability of land for the region as a whole which disguise the more acute shortage of readily available land and premises in the Leeds area. The lack of readily available sites and premises in Leeds has meant that many occupiers have failed to find suitable accommodation and as a result have sought property in other regions. Anecdotal feedback from inward investment agents and economic development specialists active in the Leeds market has also indicated the difficulties in being able to match inward investment opportunities to accommodation, particularly in the R&D sector.

Cushman and Wakefield has mapped all the industrial sites over 4 ha (10 acres) that we are aware are currently on the market in the Leeds area. Figure 6.4 below also includes office sites. It illustrates that there is an uneven distribution and with limitations to the supply of sites to the north of Leeds. It also shows the limited range of property segments catered for with no dedicated innovation facilities or science parks, in sharp contrast to other competing city regions such as Manchester and Sheffield with their Airport MediPark and Advanced Manufacturing Park respectively.

The limitations to Leeds’s land and premises portfolio underlines the potential role that a growing LBA hub employment zone could have in enhancing the city’s offer to the investor and occupier markets.

The Council’s Employment Land Review 2010 update confirms the quantitative need for new site allocations across the administrative area. The document provides an assessment of the requirements for and supply of employment land in Leeds over the course of the next Local Plan. It concludes that there is a need for 536 ha of employment land for industrial purposes over the period 2010-2028, set against a portfolio of 350 ha to be rolled forward (these being comprised of sites which the review considers are suitable for continued employment use), leaving a residual requirement of 186 ha of new allocations, as shown by Figure 6.5 and 6.6 below.

The Employment Land Review also provides a sub area analysis of need and supply to inform the process of new allocations. The analysis is based on socio-demographic as opposed to market factors. It shows that there is a marginal requirement for new allocations in the ‘Outer North West’ zone (the zone in which LBA is located), but that when aggregated

Page 42

for all north Leeds zones, there is actually a significant shortage and a need for new allocations, as illustrated by Figure 6.8 below. This further demonstrates the role that LBA can play as an extended employment zone in helping meet the future employment requirements of the City.

Figure 6.4: Supply of strategic employment sites in Leeds (over 4 ha)

Employment sites

City Centre Kirkstall Thorpe Park Road South BankTowngate Link Enterprise Zone Skelton Nepshaw Lane/ Grange Road Leeds Gelderd Rd/ Valley Park Asquith Ave Haigh Park Bruntcliffe Road

Page 43

Figure 6.5: Leeds employment land requirements (ha)

600

500

400

300

200

100

0 Land equivalent (ha) Sites to be retained and Shortfall carried forward (ha)

Figure 6.6: North Leeds employment land requirements (ha)

180 160 140 120 100 Land requirement 80 to 2028 (ha) 60 40 Existing 20 porfolio (ha) 0 Inner North Inner North Outer North Outer North Total North East West East West Leeds

In 2015 Leeds Council commissioned a further study to examine the local needs for additional employment land within the North West area of Leeds (Assessment of Employment Land Needs for North West Leeds, BE Group June 2015). The study confirmed that there is a need for new allocations of land over and above existing allocations to meet employment land needs in the order of 12-14 ha. It did not however consider the wider need

Page 44

across the District as a whole or examine the need that a strategic employment site at the airport could play in meeting the District wide need.

A Strategic Employment Land Review produced on behalf of the Leeds City Region LEP by Andy Haigh Associates in October 2016 highlighted further evidence in support of the case for a strategic land allocation at the Airport. A key finding of the report was that there was shortages of the right type of land in the right location to meet future economic development needs, in particular related to specialist provision for University spin offs, advanced manufacturing and strategic sites for investment. The report recommends that further work be carried out to identify and allocate strategic employment sites that can meet this specialist need and explicitly identifies the Employment Hub at the airport as an opportunity which should be explored.

LBA Industrial market

At the local level there is a significant amount of industrial accommodation in the immediate surroundings of the airport, concentrated on the following estates

 Leeds Bradford Airport Industrial Building, A658 Harrogate Road  Moorfield Business Estate, A658 Harrogate Road  Carlton Industrial Estate, Cemetery Road  Westfield Industrial Estate, Kirk Lane, Yeadon  South View Business Park, off A65

These parks are well occupied and accommodate a range of light industrial and manufacturing occupiers.

There has been a regular churn of occupiers and new lettings in recent years resulting from the relocations both within and from outside the local area. The CoStar Interactive database recorded a number of building lettings and sales in the last three years, as illustrated in Table 6.4 below, indicating a healthy demand for property on a leasehold and freehold basis. Over the last 10 years (2007-2017) there has been an average of 10,757 sq m per annum (115,000 sqft).

Page 45

Table 6.4: Industrial transactions 2014-2017 within a 2 mile radius of LBA (source CoStar)

Existing availability is limited to one building at the Leeds Bradford Airport Industrial Estate, totalling 3,127 sq m (33,663 sq ft):

Table 6.5: Existing Availability of Industrial property within 2 mile radius of LBA (CoStar)

As with the local office market, the level of occupier activity and transactions on the estates surrounding Leeds Bradford Airport underlines the potential for further development in the future. On the basis of the prevailing average take up levels (10,575 sq m), the existing supply of 3,127 sq m demonstrates that demand outstrips current supply.

Summary

Commercial market conditions are improving and displaying resilience in the face of macro- economic and political uncertainty. Increasing take-up and falling supply are evident and there are several genuine speculative development schemes underway across the industrial and office sectors.

Looking at the long term, there is a projected need for new high quality serviced employment land to meet market requirements. The dynamics of the office market in Leeds are such that there is a strong in and out of town market and a real opportunity for LBA to fulfil the future requirements of the out of town market. There is a shortage of industrial sites – both quantitative and qualitative – to meet the long term market requirements of Leeds with an acute shortage of sites in the north Leeds area. Allied to the potential for surface access enhancements and airport related growth, there is considerable potential for commercial pressures to drive the delivery of major hub and employment zone at the Airport.

Page 46

7 Airport Land Development Strategy Demand for an Employment Hub at LBA

There is a major opportunity to enhance Leeds’ commercial portfolio of land and premises through the creation of an Employment Hub at the airport. The Hub will reinforce the growth of the Airport and will help drive forward the economic ambitions set out in the LEP’s Strategic Economic Plan, in particular plugging gaps in the city’s commercial property offer and driving forward the emerging industrial strategy for advanced and innovative manufacturing.

There is an established demand for new commercial land and floor space at Leeds Bradford Airport that arises from the concentration of occupiers locally and the growth of the Leeds economy and its associated accommodation requirements. The collated evidence set out in Section 6 shows that there is a healthy churn of new lettings year on year in respect of both industrial and office accommodation and, over time, there have been new development schemes such as Airport West and Moorfield Industrial Estate which have been built to respond to these occupier requirements.

Looking forward, we consider there to be a major opportunity to expand the commercial offer alongside the growth of the airport and surface connections to create a hub that exploits the potential of the aviation sector and the attributes of the location for office and industrial occupiers seeking an international ‘front door’. There are a number of sources of demand that can be targeted:

 Innovative manufacturing and Research & Development (R&D) businesses linked to the growth strategies of the LEP and HE sectors  Occupiers expanding/downsizing or moving from local business estates – as demonstrated by the collated evidence in Section 6  New occupiers seeking airport or north Leeds location – Cushman and Wakefield is aware of recent requirements from occupiers seeking airport location in respect of both office and industrial accommodation  Footloose national/international occupiers seeking high quality/differentiated and branded location  Occupiers linked to the airport – operational and non operational activities linked to the growth of the airport, as dealt with in Section 5 of this report.

The hub can reinforce the economy of Leeds City Region providing a differentiated commercial real estate opportunity to attract new investment and growing firms, particularly focused on knowledge based businesses with international networks.

In respect of the office sector there is potential to attract aviation occupiers including flight operating businesses with requirements for national/regional HQ and call centre activities.

Page 47

Figure 7.1: Drivers of LBA Employment Hub

• Support Government aviation policy Policy • Support ambitions of LCR SEP

• Reinforce growth of airport / LCR Economy economy • Accommodate LCR growth sectors LBIA Employment • Meet local and

HUB strategic demand for commercial Commercial land and floor space

• Facilitate growth of operations on airport Aviation • Drive growth for business activities off airport

In terms of the Industrial sector, there are three sub markets: aviation related (e.g. caterers, freight forwarding / general logistics, repair services); innovative manufacturing (in a combination of property types such as light industrial, R&D, hybrid) and general industrial and logistics. The potential for growth exists as a result of the anticipated growth of air freight, the capacity of existing airside facilities and supplier chain arrangements. The latter will absorb existing pent up demand and investment from new firms particularly for occupiers with international networks (client/parent companies).

Offices will be a combination of multi occupancy buildings let to SMEs (potential for a Regus type managed workspace), and; larger single occupier firms such as flight operator regional HQs and travel companies.

In order to support the strategy for the Employment Hub there will need to be a mix of uses to create a place and identity (not just a business park) – sectors to include hotel/leisure, retail as well as office and industrial development. Surface access improvements will also be necessary.

Quantitative Justification

The proposed allocation of land for the Employment Hub is justified by:

Page 48

 The proposed allocation of the site as a key element in meeting the Core Strategy identified need of 493 ha of employment land, following detailed assessment of site options  The particular shortage of employment sites to the North of the City and the identified need for new allocations of employment land in close proximity of Leeds Bradford Airport  The alignment of the Local Plan to the economic development needs of Leeds area as clearly documented in the Leeds City Region’s Strategic Economic Plan which identifies the Employment Hub as a Strategic employment site.

The unique circumstances of the Employment Hub provide further support to the case for the site’s allocation for employment. Specifically:

 The opportunities for the Employment Hub to support the sustainability and growth of the airport, allowing for the growth of supply chain related activities and support functions to the Airport; and  The site’s location at the Airport provides a differentiator for occupiers and as such offers the potential to attract new occupiers to Leeds that might not otherwise locate in Leeds (for example those foot loose occupiers seeking an airport location).

The site’s allocation will therefore provide an important role in meeting Leeds’ economic development needs.

Development quantum and indicative masterplan

A conceptual masterplan has been prepared to illustrate the potential of the Employment Hub. The masterplan has been produced by 5plus architects in collaboration with WYG and Cushman and Wakefield. The masterplan incorporates LBA’s existing land holdings together with the parcel of Greenfield land to the north (draft allocation EG3) which is under their control. The masterplan illustrates the indicative route of road and rail surface access improvements together with two differentiated land use zones for the following development:

Air Innovation Park

A Business Park providing accommodation for occupiers in identified LCR growth sectors. A high quality environment with a focus on innovative manufacturing facilities with strong linkages to University based R&D. The Air Innovation Park will incorporate a range of accommodation types to meet the variety of business functions benefiting from the airport location including offices, R&D hybrid units, light industry and logistics. The business park will respond to an identified gap in the supply of quality land and property options for inward investors and high value growth businesses seeking well connected and high profile locations.

Page 49

Airport Village

A new mixed use commercial centre providing vital services and accommodation to support the growth of the airport. This zone will provide accommodation for activities directly and intrinsically related to the economy of the airport, such as flight operating company (/regional) headquarters and support functions, hospitality and general amenities (comprising new hotels, conference and meeting facilities and restaurants and retail).

Figure 7.1 on the following page illustrate the concept plan and development plots.

Page 50

Figure 7.1 Indicative Masterplan – developable areas

Page 52

Table 7.1 Development Schedule Plot Use Footprint Floors GIA sq.m. sq.m.

Airport Village A Retail 4,459 1 4,459 B Office B1 2,150 2 4,300 J Office B1 7,860 2 15,720 K1 150 bed Hotel 900 5 4,500 K2 Office B1 3,930 2 7,860

Airport Innovation Park C Innovative manufacturing (B1 and B2) 5,550 1 5,550 D Innovative manufacturing centre (B1 - office, conference, workshops, labs) 5,550 2 11,100 E Innovative manufacturing (B1 and B2) 16,489 1 16,489 F General industrial and Logistics (B2/B8) 11,900 1 11,900 G General industrial and Logistics (B2/B8) 9,350 1 9,350 H Innovative manufacturing (B1 and B2) 5,828 1 5,828 I Innovative manufacturing (B1 and B2) 4,588 1 4,588

Table 7.2: Anticipated Delivery Timescales Plot Use Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Local Plan Planning Infrastructure Rail complete Road complete Airport Village A Retail 2,200 2,259 B Office B1 2,150 - 2,150 J Office B1 3,144 3,144 3,144 3,144 3,144 K1 150 bed Hotel 4,500 K2 Office B1 1,572 1,572 1,572 1,572 1,572

Airport Innovation Park C Innovative manufacturing (B1 and B2) 1,388 1,388 1,388 1,388 D Innovative manufacturing centre (B1 - office, conference, workshops, labs) 5,550 5,550 E Innovative manufacturing (B1 and B2) 1,499 1,499 1,499 1,499 1,499 1,499 1,499 2,998 2,998 F General industrial and Logistics (B2/B8) 5,950 5,950 G General industrial and Logistics (B2/B8) 4,675 4,675 H Innovative manufacturing (B1 and B2) 1,166 1,166 1,166 1,166 1,166 I Innovative manufacturing (B1 and B2) 1,147 1,147 1,147 1,147

Page 53

Table 7.1 above illustrates an indicative schedule of accommodation based on the masterplan that has been developed, taking into consideration the various market, economic and policy factors that will influence the mix. In total there are 27,880 sq m GIA (approximately 300,000 sq ft) of office floor space and 53,705 sq m (approximately 580,000 sq ft) of industrial accommodation.

An innovative manufacturing centre is proposed which could include a combination of office, labs, workspace, conference and support facilities similar to that which has been successfully implemented on other advanced manufacturing business parks. The proposed centre will help to anchor and stimulate the creation of innovative manufacturing activities on the wider site and will provide accommodation for driving forward both LEP/WYCA (West Yorkshire Combined Authority) and Higher Education agendas. Initial consultation with WYCA has indicated support for the concept which it is considered could form a key part of the LEP’s emerging Industrial Strategy.

The retail floor space totals 4459 sq m (approximately 48.000 sq ft) which is envisaged would represent a combination of convenience retail and eating and drinking establishments to provide the amenities to support the business park. A single 150 bed hotel is also included which is considered will support the growth of the airport.

The accommodation listed is indicative only, and it should be noted that in practice we see the delivery of the scheme being flexible to the requirements of the market and the investment requirements of public sector partners.

Delivery Programme

Table 7.2 provides an indicative development programme to illustrate how the site could be delivered and built out within the 12 year period (2017 to 2028). It assumes a three year lead-in period to include the process for adoption of the Local Plan site allocation, preparation of planning application(s) and receipt of consents, site preparation and infrastructure installation prior to development completions.

The overall rates of delivery of the industrial and office floor space are considered to be realistically achievable given the various commercial, economic and aviation growth drivers as documented in this report. The overall rates of delivery of industrial floor space average 4,475 sq m GIA per annum over the 12 year period, which compares with an annual average of industrial floor space lettings of 10,757 sq m GIA within the local area. Office development assumptions average 2323 sq m GIA over the 12 year period which compares with an average of floor space lettings in the local area of 1593 sq m per annum; whilst the rate of delivery at the Employment Hub is projected to exceed that achieved locally, this is not considered unrealistic given the catalytic impacts of surface access improvements in particular the rail station.

Delivery mechanisms

LBA will seek to work in collaboration with a third party developer/investor in a joint venture capacity or look to dispose of parcels of land on the basis of an agreed masterplan. Infrastructure improvements are a key consideration in the delivery programme.

Collaboration between public and private sector partners will be enable the benefits of the Employment Hub to be maximised and the following measures are being developed with partners:

 Creation of Enterprise Zone status – many competing cities across the UK have designated Enterprise Zones on land adjacent to airports to enable the EZ incentive package to be used to attract occupiers and facilitate enabling infrastructure investment. There is an opportunity for Leeds City Region to offer the business rate discounts (up to £55,000 per annum for five years) to occupiers within the Airport Employment Hub, funded by business rate additionality accumulated in Leeds Enterprise Zone. This would help to both brand the Employment Hub in a positive way.

 Land value for infrastructure funding – where the value of the land is deployed to pay for the infrastructure works required to unlock / enable delivery. This is an approach that has been used to enable the delivery of public sector sites that have significant enabling/infrastructure costs or abnormals and the public sector wishes to help facilitate/enable delivery.

 Tax increment financing (TIF) – under the current arrangements that came into effect from 1st April 2013, local authorities are entitled to retain 49% of business rate income generated within their areas. Therefore, the potential exists to establish a TIF zone around the Employment Hub site that would enable finance to be raised against the anticipated additional business rate receipts that the Council retains.

 Direct public investment – innovation and R&D parks tend to exist because of public sector and HE investment. The possibility of utilising existing and emerging funding streams such as the Local Growth Fund to invest in property projects is being examined in view of the clear alignment of the Growth Hub masterplan and the Strategic Economic Plan for Leeds City Region.

 Other business support grants - in accordance with the range of public sector support available through the LEP and in connection with the emerging Industrial Strategy.

Page 55

8 Economic Impact Assessment

An initial economic impact assessment has been undertaken to demonstrate the significant economic potential of the LBA Employment Hub proposals, as below.

Development programme assumptions

The timing of delivery of the proposed development will depend on a range of factors including:

 Occupier demand  Planning process, specifically the timescales for adoption of the Council’s allocations document  Timing of expansion in operational land and property requirements of the Airport  Strength of the development market and the timing and length of the development cycle  Timing of infrastructure installation  Appetite of partners to invest and nature of investments  Broader macro-economic conditions.

An indicative development programme has been devised as per table 7.2 in accordance with the phasing strategy set out in Section 7 based on the following broad assumptions:

 Office development is delivered at an average rate of 2323 sq m per annum over the assumed 12 year delivery period, although is not assumed to commence until 2024 when the surface access road will be completed.

 Industrial and logistics is assumed to be delivered at an average level of 2705 sq m per annum over the 12 year period.

 For the purposes of the assessment, innovative manufacturing space is assumed to be split 90% manufacturing space and 10% office space (innovative manufacturing centre is assumed to be 50% office space and 50% manufacturing space although in practice could be a hybrid of other uses e.g. laboratory space). The innovative manufacturing space is assumed to be delivered at an average rate of 2,420sq m (26,000 sq ft) per annum between 2020 and 2028. Innovative manufacturing space will comprise essentially R&D space which will need to be flexible to meet occupier demand.

 Retail and leisure – one 150 bed hotel is assumed in 2024 and the retail uses are assumed towards the back end of the programme (2025/26) reflecting the impact of the growth of the airport.

Page 56

Table 8.1: Assumed Development Programme

The following sections examine the economic benefits of hub delivery. It has been assumed for the purposes of this analysis that the area of impact is at the Leeds City Region level. All economic benefits have been modelled over a 25 year timeframe from the present day.

Job hosting capacity (gross and net additional)

Employment benefits have been estimated through the application of standard worker floor area ratios which are presented as gross and net. Gross jobs are estimates of the job hosting capacity of the development based on the scale of development anticipated. Net jobs take account of factors such as leakage, displacement and multiplier effects. The figures quoted are based on the full job hosting capacity of the scheme and make no allowance for voids and therefore should be interpreted as the maximum job hosting capacity of the scheme.

Table 8.2 – employment hosting capacity

Gross jobs 4,620

Net additional jobs 3,059

Page 57

A breakdown of the gross/net additional jobs by use type is set out below:

Table 8.3: Gross and net additional jobs by use type

Assumptions

Gross jobs have been estimated through applying the following employment densities to the floorspace in accordance with the 2015 HCA Employment Density Guide (3rd Edition):

Table 8.4 – employment density assumptions

Use Type Employment Density –sqm per FTE (GIA/GEA unless specified) Office 10 (NIA) Innovative Hub building - Assumed 50% manufacturing and 50% office manufacturing/R&D (likely to also comprise conference facilities, labs etc) Wider innovative manufacturing floorspace – assumed 90% manufacturing and 10% office Retail 18 (NIA) Hotel 1 employee per 2 bedrooms Industrial 36 Logistics 70

Page 58

To estimate the net additional employment capacity, consideration has been given to factors of additionality by use type as below (note for the wider innovative manufacturing floorspace beyond the innovative manufacturing centre/hub a leakage rate of 7% and displacement rate of 15% is assumed).

Table 8.5: Additionality assumptions

Further explanation is provided below and all assumptions have been ‘sense checked’ against the 2014 HCA Additionality Guide.

Leakage – analysis of Census travel to work data identifies that at the LCR level, there is a leakage rate of 7% and this has therefore been used for all of the use types apart from office and innovative manufacturing related employment. A higher rate of 15% has been prudently applied to these higher value uses to reflect the increased likelihood of these attracting employees residing outside of the LCR.

Displacement – assumptions range from 30% for innovative manufacturing employment through to 70% for hotel/retail. This reflects the fact that higher value R&D/innovative manufacturing and office activity is likely to result in a lower level of displacement of existing economic activity within the City Region. A proportion of the innovative manufacturing/R&D space may also be occupied by new businesses and spin-outs from HE establishments which would further reduce the propensity for displacement. Lower value logistics/leisure/retail uses by their very nature have a propensity for high rates of displacement. The HCA guidance refers to 25% as being low and 75% as being high and these therefore correlate with this.

Page 59

Multiplier – as per the HCA Additionality Guidance Paper. An average of the local and regional multiplier was applied to reflect the City Region scale of assumed impact for this assessment.

Deadweight – a nil deadweight position has been assumed throughout (i.e. in the absence of the LBA proposals, no other economic outputs would be delivered on this site).

Gross Value Added (GVA)

GVA is used as an indicator of economic output and measures the contribution to the economy of individual producers, industries or sectors. It is estimated through the application of typical annual GVA per worker data to the net additional job capacity estimates outlined above.

Impacts

Cumulative undiscounted and discounted GVA impacts over a 25 year timeframe are presented below:

Table 8.6: GVA impacts

Cumulative GVA impact over 25 years £3.118bn

PV Cumulative GVA impact over 25 years £1.834bn (assuming 3.5% discount rate)

Assumptions

Average GVA per worker figures by sector at the Leeds Local Authority level have been estimated based upon the total annual GVA output for a number of relevant sectors (ONS, NUTS 3 data, 2012) divided by the total number of workers in the sector (Business Register and Employment Survey, ONS, 2012). This has then been multiplied by the net additional job outputs associated with each of the commercial components of the scheme. In some instances, informed SIC related assumptions were made to align the GVA data with the employment data. Innovative manufacturing based GVA has been based upon an average of the office and manufacturing use types. The following GVA per worker figures were applied based upon this:

Table 8.7: Assumptions by use type

Page 60

GVA data is not published at a detailed SIC level at the LA scale which explains why a generic GVA per worker of £34,460 has been applied to logistics/hotel/retail uses based upon the GVA and employment data for the ‘distribution, transport accommodation and food’ classification. The HM Treasury discount rate of 3.5% was applied to calculate the Net Present Value of the cumulative GVA impacts over the 25 year period.

Business rate income

Under the arrangements that came into effect from the 1st April 2013, local authorities can retain up to 50% of business rate income generated locally. Commercial development sites such as the Airport Hub that attract new occupiers into the area therefore offer the potential for generating additional business rate receipts for the local authority. Under current Government proposals, there could be the potential for further local rate retention locally from 2019/20.

The proposed scheme has the potential to deliver the following business rate incomes which could be retained by the local authority (in full/in part depending upon the rates devolution consultation that is underway). These estimations are based on a number of assumptions around likely rateable values and are based on the current UBR multiplier of 2017/18 of £0.497 and modelled over a 25 year period.

 PV total rates income (assuming 100% local retention) of £41.8m  PV total rates income (assuming 50% local retention i.e. the current position) of £20.9m

Wider benefits

The proposals will deliver a number of additional economic impacts:

 Supporting additional Airport operational growth – the proposals will enable existing non-operational airport uses to relocate to free up land for core airport operational growth. This would enable the airport to enhance the scale and quality of its offer and operations, both in terms of passenger and freight numbers, resulting in significant economic benefits to the City Region.

 Creating construction jobs – the delivery of the proposed new commercial floor space will support a significant number of construction jobs over a 15-25 year period, a large proportion of which could be sourced locally. The supply chain expenditure relating to this construction activity could also be significant.

 Leveraging private sector investment – the delivery of the scheme will be private sector led and will therefore leverage a significant level of private sector investment to the City Region given the scale of the proposals.

 Providing skills development and training opportunities – the proposals will attract high value uses and occupiers which will provide high quality and accredited skills and training development opportunities. There is the potential for the existing FE presence at the Airport to expand and for it to attract additional FE/HE activity, particularly though the

Page 61

proposals for innovation-based activity on part of the site. There is also the opportunity for additional aviation related skills and learning providers to be based at the Airport as it expands.

 Providing local employment opportunities – the proposals will create a significant number of and range of employment opportunities to meet the demographic needs of the LCR economy. It is envisaged that a high proportion of the jobs will be taken by local people given the low rates of leakage across the City Region as a whole.

 Driving City Region competitiveness – the proposals have the potential to attract significant inward investment and to enhance the overall offer of the City Region economy as a business destination to ensure that it can compete with locations such as Manchester and Birmingham on an international level.

Summary

A summary of the core quantitative economic impacts modelled over a 25 year period is presented below in table 8.8.

Table 8.8: Economic Impact Summary

New commercial floorspace 101,644 sqm (GIA)

New gross job hosting capacity (FTEs) 4,620

New net additional job hosting capacity (FTEs) 3,059

Cumulative GVA over 25 years £3.118bn

PV Cumulative GVA over 25 years £1.834bn

Business rate income uplift (assuming 100% local £37.4m retention)

Business rate income uplift (assuming 50% local £18.7m retention)

Page 62