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South West Herts Economic Study Final Report Final

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South West Herts Economic Study Final Report Final South West Herts Economic Study Update A Final Report by Hatch Regeneris 5 September 2019 South West Herts Authorities South West Herts Economic Study Update 5 September 2019 www.hatchregeneris.com South West Herts Economic Study Update Contents Page Executive Summary i Aims of the Study i Functional Economic Market Area i Policy Context ii Recent Economic Performance iii Commercial Property Market Trends iv Future Growth Scenarios v Demand and Supply Balance viii 2. Introduction and Purpose of Study 1 3. Economic Geography of South West Herts 2 Functional Economic Market Area 2 Relationship with neighbouring areas 6 4. Recent changes in policy 15 Planning Policy 15 Economic Policy 17 5. Economic and Labour Market Performance 21 Recent Economic Performance 21 Analysing the Five Foundations of Productivity in South West Herts 26 6. Commercial Property Market Trends 54 Office Market Review 54 Industrial market review 65 7. Future Growth Scenarios 72 Employment-led Scenario 72 Labour Supply Scenario 87 Higher Growth Scenario 92 Trends Based Scenario 99 Replacement Demand 104 Conclusions 105 South West Herts Economic Study Update 8. Supply of Employment Land 112 9. Demand and Supply Balance 126 Office market balance 126 Industrial market balance 128 10. Conclusions and Recommendations 131 Appendix A - Inacuracies in Employment Datasets Appendix B - Ratios for converting total employment in to FTEs Appendix C - Method for allocating sectors to use classes Appendix D - Site Reviews South West Herts Economic Study Update Executive Summary Aims of the Study i. This report provides an update of the South West Hertfordshire Economic Study which was published in January 2016. The key requirements were to produce an updated economic study which provides the councils (Dacorum Borough Council, Hertsmere Borough Council, Three Rivers District Council, St Albans City and District Council and Watford Borough Council) with: • An understanding of the functional economic market area and relevant policy context; • An objective assessment of long term employment land and premises needs over the period 2018 to 2036, and the current and future supply of employment land; and • Possible local authority planning and strategic economic development responses, including the quantum, location and type of jobs and land use allocations required to meet these identified needs. ii. The research has involved analysis of recent economic and property market trends in South West Herts, a fresh look at the scenarios for future growth and a more comprehensive assessment of the current and future supply of employment space and land. This has drawn upon data analysis, consultations with commercial agents and site reviews. Functional Economic Market Area iii. The 2016 study identified a functional economic market area made up of Dacorum, Hertsmere, St Albans, Three Rivers and Watford. This was based on evidence of strong commuting and migration relationships and shared leisure, retail and public sector catchment areas. There has been limited data published since the 2016 study which would allow us to update the assessment, however the data which is available continues to suggest the definition of the FEMA is valid. This includes: • Recent migration data continues to point to strong relationships between the five authorities. The only strong relationship outside the FEMA is between St Albans and Welwyn Hatfield which was also the case in the 2016 study. • The refreshed Strategic Economic Plan continues to identify an M1 growth corridor which includes each of the local authority areas. • The 2018 South West Herts Retail and Leisure Study shows a significant proportion of each district’s convenience and comparison shopping expenditure is within the FEMA, with a large amount of comparison spending occurring in Watford. iv. The FEMA also shares strong relationships with other areas which could exert a growing influence on economic and labour market trends in South West Herts. How these relationships might change in future is highly uncertain, however we would note the following: i South West Herts Economic Study Update • London: Given the high level of housing growth planned for South West Herts and continuing affordability challenges in London, it seems likely that the strong in- migration and out-commuting flows between the FEMA and the capital will continue to grow. The loss of employment floor space in London also presents opportunities for South West Herts to attract jobs and businesses. Although this would be dependent on South West Herts authorities first addressing their own undersupply. • Luton/Central Beds: significant employment and housing growth is planned around Luton, including ambitious plans to grow the capacity of the airport. However we do not anticipate this undermining growth in South West Herts. The economies of the two areas are sufficiently different for this growth to complement rather than compete with growth in the FEMA. • Cambridge-Milton Keynes-Oxford Corridor: this high performing area has been identified for significant growth up to 2050. This would involve significant investment in new infrastructure and housing and would look to capitalise on the area’s knowledge assets. While any effects on South West Herts would be long term there may be a risk that the scale of development and new infrastructure investment could make this a more attractive investment location for certain sectors where there may be competition with South West Herts. Policy Context v. Key policy developments since the 2016 study include: • Changes to the National Planning Policy Framework (NPPF) and Planning Practice Guidance (PPG). This does not include any changes to the method for assessing employment land. However there is a significant change in the way that housing need should be estimated. This is likely to result in much higher housing targets and population growth for the FEMA. The economic study needs to take account of this to ensure there is not a significant imbalance between population growth and jobs. • Publication of the UK Industrial Strategy: the primary aim of this strategy is to turn around the poor productivity performance of the UK economy. It includes a requirement for all mayoral combined authorities or local enterprise partnerships (LEPs) to produce local industrial strategies (LIS) which respond to local challenges and opportunities. The Hertfordshire LEP is in the early stages of preparing its LIS which is likely to have a particular focus on building on its knowledge assets and developing its science based industries. • Envirotech Enterprise Zone: Hertfordshire’s Enterprise Zone includes sites in Dacorum and St Albans and aims to encourage growth in the LEP’s priority sectors, with a particular emphasis on environmental technology. Development to date has all been at the Prologis site in Maylands Business Park which has developed large sheds. Demand for this space has been very strong although none of the confirmed occupiers are from environmental technology sectors. ii South West Herts Economic Study Update Recent Economic Performance vi. There are a number of errors and inaccuracies in the employment data for South West Herts which makes it difficult to understand recent economic and labour market trends. Our analysis suggests standard employment datasets overestimate employment by as much as 20 to 30 per cent (up to 90,000 jobs). We have made adjustments to the employment data for this study but the analysis should be treated with caution. vii. With these caveats in mind, recent trends show: • Employment has continued to grow at a strong rate: the long-term growth rate is around 0.4% p.a. but recent levels of growth are much stronger (1.5 to 2.8% p.a. based on the average growth rate over the last ten and five year periods) • Productivity has fallen and is now lower than the UK average: average GVA per job has fallen by £1,000 and is now 2% lower than the national average, having been 8% higher in 2001. viii. To understand the recent poor productivity performance, and to identify how this could be reversed, the report analyses the “five foundations of productivity” identified in the UK Industrial Strategy (ideas, people, infrastructure, business environment and places). The lessons for South West Herts are as follows • Ideas: South West Herts has a number of research and innovation assets on which to build, with particular research strengths in agri-tech and buildings research. However these sectors are still small and developing. Supporting their long-term growth should be a priority, but this should be alongside measures to support South West Herts’ established strengths in professional services and ICT. These are high value sectors with significant potential for further growth and should be the main focus for South West Herts. • People: the FEMA has a very highly skilled workforce and continues to attract talented residents, however this has not been matched by growth in highly skilled and high value jobs. A large proportion of recent jobs growth have been in lower and intermediate skilled jobs which explains why productivity has fallen. • Infrastructure: the key infrastructure priority is improving east-west links in the FEMA (centred on the A414 and A405). Both road and rail links are in need of improvement, and the stress is likely to increase as a result of future population and jobs growth. This will affect business productivity and will make it harder to attract investment to some of the key growth locations, including the Enterprise Zone sites. • Business environment: South West Herts has a highly entrepreneurial population with business start-up rates well above the national and regional average (particularly in ICT and professional services). This suggests a need for flexible and affordable workspace to support the growth of these businesses. • Places: each of the districts has distinctive sector strengths (science and R&D in St Albans, TV and film in Hertsmere and Three Rivers) meaning a range of tailored responses are required to support growth and productivity.
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