Fish Island South

• The regeneration of Fish Island South was a specific goal when mixed use planning permissions were given for the properties facing the River Lea. People have bought properties here on the understanding that they were in the first wave of redevelopment and that they would become part of a thriving community. Why is the Council now making such a dramatic U-turn, returning to a policy which has been proven to be obsolete?

• Before residential development began, Fish Island was a failing industrial area, with low-density employment figures and empty lots. A few large employers had also moved out of the area to escape rising land values/rents and had not been replaced. What evidence do the Council have that a return to industrial zoning will avoid this same fate in the future?

• GVA Grimley prepared an employment report for Henley Homes in February 2006 (copy enclosed). They carried out an analysis of the commercial property market in Tower Hamlets and surrounding Boroughs. Their research found that there is currently 37,085 sq m of available industrial space in Tower Hamlets. When compared against the take-up figure of 3,797 sq m per annum, this indicates that there is approximately 9½ years of immediately available space in the borough to satisfy short-term requirements.

• We have been advised that the demand for industrial land has shifted east out of central . Developers are seeking larger, more accessible areas of land further out of the capital in places such as Dartford and Havering. There is a huge oversupply of industrial space in Tower Hamlets and Fish Island South is not an ideal area for industrial operators. Therefore there is unlikely to be sufficient industrial demand to regenerate Fish Island South as an industrial area.

• If this policy is enacted, the Olympics will adjoin an underdeveloped unappealing area as opposed to a flourishing chain of well-designed developments. Mixed use regeneration of Fish Island South could create an active community where people live and work next to the Olympic site. The LDF could require a high quality of urban design in Fish Island South to ensure an appropriate interface with the Olympic and legacy proposals.

• If this policy is enacted, there is a danger that the riverside walkway will remain unimproved and inaccessible. Henley Homes has undertaken to regenerate a stretch of the walkway and would be keen to complete this work, for which it has already paid, in order to add to the aesthetics and accessibility of the whole waterfront section.

• Mixed-use developments are bringing much-needed social housing and S106 contributions to Tower Hamlets.

• Mixed-use developments subsidise the commercial units located within them, bringing more jobs than industrial zoning would.

• Locating sources of employment at the heart of residential districts can only be beneficial to those districts and lead to faster and more sustainable growth. Allowing those sites which back onto the River Lea to become mixed-use developments and the rest of Fish Island South to remain industrial will set up a positive symbiosis. Fish Island South will become busy throughout the day, as both workers and residents make use of the increasing number of local amenities.

• Prime waterfront sites would be wasted as commercial lots. Developers keen to capitalise on these sites will bring more revenue into Tower Hamlets than commercial use would and the result is more aesthetically appealing, indeed award-winning.

GVA Grimley Iceland Wharf

Economic and Employment Study Henley Homes plc February 2006

CONTENTS

1. INTRODUCTION...... 1

BACKGROUND...... 1 THE PROPOSAL ...... 1 STUDY AREA...... 1 2. ECONOMIC CONTEXT ...... 3

OVERVIEW ...... 3 TOWER HAMLETS EMPLOYMENT PROFILE ...... 5 UNEMPLOYMENT PROFILE ...... 6 SUMMARY...... 6 3. PROPERTY ASSESSMENT ...... 8

INTRODUCTION ...... 8 CHANGE IN STOCK OF FLOORSPACE...... 8 DEVELOPMENT ACTIVITY ...... 10 FLOORSPACE AVAILABILITY ASSESSMENT ...... 11 MARKET DEMAND ...... 14 SUMMARY...... 16 APPENDIX A: LOCATION MAP OF FISH ISLAND...... 18

APPENDIX B: PHOTOGRAPHS OF ICELAND WHARF ...... 19

APPENDIX C:AVAILABLE INDUSTRIAL PROPERTY SCHEDULE (TOWER HAMLETS) ...21

APPENDIX D: INDUSTRIAL PROPERTY TAKE-UP SCHEDULE (TOWER HAMLETS)...... 22 Iceland Wharf Economic and Employment Study

1. INTRODUCTION Background 1.1 This report provides an analysis of the commercial property market and an assessment of the labour market in Tower Hamlets and surrounding boroughs. The report is in support of a planning application by Henley Homes plc properties for the redevelopment of Iceland Wharf for a residential based mixed-use scheme.

1.2 This report provides a focussed update on the original report produced in October 2005, rather than a detailed re-assessment, with particular attention paid to how market sentiment has changed. The report also addresses the issues raised by Tower Hamlets borough council as far as they have been specified.

1.3 The objectives of the report are as follows:

o To identify the change in industrial employment in the study area along with projections for the future, and assess its effect upon the property market; and

o To provide an analysis of industrial floorspace availability in the study area linked to past demand levels.

1.4 The method used has involved a combination of review of material and data, discussions with local authorities and local property agents, and in-house market knowledge. The results of this approach have enabled the above components to be rigorously examined, with a robust assessment produced.

The Proposal 1.5 The site is located on the west bank of the River Lea with the A12 to the west of the site. The site is currently partially occupied by a number of small businesses, including a vehicle-breakers and a hand car wash. It is proposed to develop the site for mixed-use, with 205 residential units planned.

Study Area 1.6 The site is located at the north-western edge of the London Borough of Tower Hamlets, and abuts the London Borough of Newham. The site is approximately 0.6 hectares in size and the land is currently used (primarily) for low value industrial purposes. The floor area is approximately 500 sq m, with between 8 to 12 people employed on-site.

1.7 The site lies in an area known as Fish Island. In practical property market terms this is bounded by the Old Ford junction of the A12 East Cross Route in the south, the /Wallis Road in the north, the A12 to the west and the River Lea to the east. (See Appendix 1 for location plan). Historically this was an established industrial and warehousing area, with relatively good access to the City and Docklands. However, the number and scale of industrial businesses has reduced significantly over the last 20 years.

1.8 Historically, Fish Island proper is defined as the area south of the Hertford Union Canal and north of Wick Lane/Crown Close. This area provides a range of recognisably industrial buildings of various sizes, many of which are pre-War, but with a number of reasonable quality buildings and sites. The southern part of this area (south of Dace Road), which includes Iceland Wharf, the industrial property offer is generally poorer

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quality, including more irregular property arrangements, limited parking/loading arrangements for some sites, and property in generally poor condition. We have examined both these areas, as relevant, in examining the more detailed property market data discussed in the report.

1.9 However, the market area for property is not limited by local authority boundaries, with factors pertinent to business operations being more of an influence, such as labour supply. Nevertheless, Fish Island and the Tower Hamlets local authority boundary have been used in order to simplify analysis and the presentation of results. In addition, however, a ‘core study area’ of Barking and Dagenham, Hackney, Newham and Tower Hamlets has been used as this forms a more realistic industrial market area.

1.10 In terms of the employment analysis, the focus has also been at the borough level, compared with London as a whole as relevant.

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2. Economic Context Overview 2.1 London’s industrial sectors, especially manufacturing, have experienced many years of employment decline. The loss of industrial jobs has been part of a wider process, in which activities that process and handle physical goods – which include distribution, transport and construction as well as manufacturing – have been replaced by the other services, including personal and community services, office-based activities and activities that handle information. London has experienced in extreme form this process of de- industrialisation, which has characterised the British economy as a whole since at least the 1960s.

2.2 Over the long term, both manufacturing output and manufacturing employment have performed worse in London than the country as a whole. In terms of manufacturing output, London has lagged behind the national growth rate. Manufacturing employment has fallen in both London and the UK, but in London it has fallen much faster. Between 1982 and 2004 the capital lost over 60% of its manufacturing jobs, approximately twice as many as the UK pro rata. By 2004, only 6% of London’s jobs were in manufacturing1.

2.3 Analysis by the Authority (GLA)2 confirms this pattern. This analysed changes in manufacturing-related employment in London between 1991 and 2002, split into three time periods. Table 2.1 illustrates how London compares in relation to the national average, and highlights the greater relative loss in employment in the capital in the manufacturing sector.

Table 2.1: Industrial Employment Change 1991-2002

1991-1998 1998-2002 1991-2002

No. Jobs % Change No. Jobs % Change No. Jobs % Change

London -45,500 -14% -47,300 -16% -92,900 -28%

GB -84,600 -2% -578,500 -13% -663,100 -15% Source: GLA (August 2004)2 2.4 Two key reasons can be identified for this poor performance of London:

• Poor environment. London (like other major urban areas) is an increasingly unattractive location for manufacturing against competing locations in the South East and elsewhere. The reasons include poor transport and accessibility, congestion, and the constraints typical of densely developed urban areas – incompatible uses, contamination, fragmented site ownership and so forth.

• Economic structure. The classification of economic activity into sectors hides important differences between London and other areas. London’s relative decline is a reflection of the special nature of its economic activities – which may be

1 Source: Experian Business Strategies Regional Planning Service Data Spring 2005 2 Source: GLA (August 2004) Industrial and Warehousing Land Demand in London (Based on Annual Business Inquiry data, and adjusted to the manufacturing sector as defined in the GLA report). Table 3.6 GVA Grimley Page 3 Iceland Wharf Economic and Employment Study

increasingly characterised by high-value-added, high-level functions, while lower- value activities decentralise to cheaper locations. Thus, while relative to the national total London has been losing the volume of activity, it has been gaining in quality.

2.5 Forecasts for the manufacturing sector continue the pattern of reducing employment in this sector. The latest forecasts by the GLA3 expect employment in the manufacturing sector in London to reduce from a base of 285,000 in 2002 to 211,000 by 2014, and to 154,000 in 2026. This is a reduction of 26% between 2002 and 2014, and 46% over the period 2002 to 2026. This is likely to lead to a corresponding reduction in the total amount of industrial property required across London.

2.6 In terms of the distribution sector London has seen growth in employment over the last decade, at a similar rate to the national average. Data from the GLA4, summarised in Table 2.2 below, shows that growth in warehousing employment between 1991 and 2002 in London was 14%, slightly less than for GB as a whole at 18%. However, change in employment in London tends to be more volatile than for the country as a whole.

Table 2.2: Warehousing Employment Change 1991-2002

1991-1998 1998-2002 1991-2002

No. Jobs % Change No. Jobs % Change No. Jobs % Change

London 49,100 23% -18,100 -7% 31,000 14%

GB 264,800 17% 9,600 1% 274,400 18% Source: GLA (August 2004)4 2.7 This sector has, in fact, been one of the main areas of growth in the ‘industrial’ sector. Part of this growth has been in strategic distribution locations, such as close to the M25 and in key road corridors such as the A4/M4 corridor.

2.8 Forecasts for future employment change in the warehousing sector by the GLA5 predict continued growth in this sector. From an employment base of 247,000 in 2002, expectations are that employment in London will rise to 267,000 by 2026 – a growth of 8%. This is below the rate of growth expected across the whole of London’s economy over this period (+21%), but is still positive.

2.9 However, it is commonly noted that the warehousing sector is, at best, a proxy for the range of activities associated with distribution services. It is therefore best used as a guide to the direction of change, rather than an accurate measure of change. A further point relates to how this change in employment translates into floorspace requirements. The distribution sector is particularly driven by productivity gains and cost reduction. Therefore, increased employment growth may not necessarily lead to an overall or comparable level of increase in property demand.

3 Source: GLA Economics (November 2004) Working Paper 11: Working London. Employment projections for London by sector. Table 2 GLA. 4 Source: GLA (August 2004) Industrial and Warehousing Land Demand in London Table 3.7 5 Source: GLA Economics (November 2004) Working Paper 11: Working London. Employment projections for London by sector. Table 2 GLA GVA Grimley Page 4 Iceland Wharf Economic and Employment Study

Tower Hamlets Employment Profile 2.10 Between 1991 and 2001 the total employment in Tower Hamlets increased from 116,899 to 155,5406 – an increase of 33%. The period 2004 to 2014 is forecast to have a lower growth rate, increasing from 173,075 to 194,1937 (12%). In overall terms, therefore, Tower Hamlets has seen a significant increase in total employment over the last decade and is forecast to see a continuation of growth, although at a lower rate.

2.11 The manufacturing sector, meanwhile, saw a decrease in employment (-6%) within Tower Hamlets over the period 1991 to 2001. Employment in this sector decreased from 18,573 in 1991 to 17,4268 in 2001. Of further note is the fact that the proportion of people employed in manufacturing in Tower Hamlets has reduced to a greater extent than London as a whole, as Table 2.3 below demonstrates.

2.12 In other words, although the rate of decline in manufacturing employment has not been as large in Tower Hamlets as in London as a whole (6% decline compared to 28% for London), the change in the economic structure of the borough has meant that manufacturing is less significant than it was – both in absolute terms and in relation to London as a whole.

Table 2.3: Proportion of Employment in the Manufacturing Sector

1991 2001

Manufacturing Employment (% of Manufacturing Employment (% of all employment) all employment)

Tower Hamlets 11.8% 7.2%

London 11% 8.1% Source: Census 1991 and 2001

2.13 Of further relevance, is the expectation that between 2004 and 2014 employment in this sector in Tower Hamlets is expected to decrease by 11%, from 15,801 in 2004 to 14,0419 in 2014. This will further reduce the significance of this sector of the economy.

2.14 An issue of particular significance to Tower Hamlets relates to those industries identified within the ‘manufacturing’ heading. The Industrial and Warehousing Land Demand in London10 study carried out for the GLA noted that:

“….. some activities which do belong to manufacturing or wholesale do not occupy industrial/warehousing space. The most clear-cut example is publishing, which is classified with printing as a manufacturing sector, yet is primarily office-based”. p6

2.15 It was recommended in the GLA report that the publishing element of ‘paper, printing and publishing’ should be excluded from any analysis of industrial demand. This has

6 Source: Experian Business Strategies Regional Planning Service Data Spring 2005 7 Source: Experian Business Strategies Regional Planning Service Data Spring 2005 8 Source: Experian Business Strategies Regional Planning Service Data Spring 2005 9 Source: Experian Business Strategies Regional Planning Service Data Spring 2005 10 Source: GLA (August 2004) Industrial and Warehousing Land Demand in London GVA Grimley Page 5 Iceland Wharf Economic and Employment Study

significant implications for the employment forecasts for manufacturing in Tower Hamlets. Paper, Printing and Publishing comprised 74% of the manufacturing sector in Tower Hamlets in 200411 – a proportion that is expected to increase in the future, as this is one of the few growth sectors in manufacturing.

2.16 However, a major element of this growth is associated with publishing activities, which, as the GLA report notes, are mainly office-based. If this component of the manufacturing sector is excluded from the analysis, then the reduction in employment in the remaining manufacturing sector in Tower Hamlets is likely to be significantly greater than the 11% forecast. Detailed figures for the level of this change are not available, but the overall effect is likely to be even less demand for industrial space.

2.17 The warehousing sector in Tower Hamlets has seen a growth in employment between 1991 and 2001 of 34%12, from 7,152 to 9,563. It should be noted that the ‘other distribution’ category has been used to measure warehouse-related employment, rather than the wider wholesale, hotel and catering category. This is broadly comparable with the data reported for London earlier, which showed a 14% increase in employment for London as a whole.

2.18 Between 2004 and 2014 employment in the warehousing sector in Tower Hamlets is expected to decline by 1%, from 8,554 to 8,43113. This rate of decline is similar to London as a whole, and suggests that overall demand for warehousing property in the borough is likely to reduce over the next decade.

Unemployment Profile 2.19 As at July 2005 there were 7,899 unemployed in Tower Hamlets. This is an unemployment rate of 5.6% (claimant count based), which compares with 3.3% for Greater London and 2.4% for the UK14. Peak unemployment in Tower Hamlets was in 1993, when it stood at 16,965. Unemployment is expected reduce to 2.9% by 201415.

2.20 The reduction in unemployment levels across Tower Hamlets over the last decade is mainly in response to the improved economic climate relative to the early 1990s and the consequential increase in jobs in the borough.

Summary • Manufacturing employment in London has fallen at a greater rate than the country as a whole between 1991 to 2002. Tower Hamlets has also seen a reduction in manufacturing employment over this period, although not to the same extent as London as a whole.

• However, structural changes in the Tower Hamlets economy mean that manufacturing is now relatively less important than for London as a whole – employing just over 7% of people in Tower Hamlets compared with 8% for London as a whole.

11 Source: Experian Business Strategies Regional Planning Service Data Spring 2005 12 Source: Experian Business Strategies Regional Planning Service Data Spring 2005 13 Source: Experian Business Strategies Regional Planning Service Data Spring 2005 14 Source: NOMIS September 2005 15 Source: Experian Business Strategies Regional Planning Service Data Spring 2005 GVA Grimley Page 6 Iceland Wharf Economic and Employment Study

• Employment in the manufacturing sector is expected to decline further in Tower Hamlets over the period 2004 to 2014. This rate of decline is expected to be twice as great as seen over the past decade, leaving approximately 14,700 people employed in the manufacturing sector. The implication is that there will continue to be a reduction in overall requirement for manufacturing space in the borough.

• Employment in warehousing increased in London over the period 1991 to 2002, although at a lower rate than the country as a whole. Tower Hamlets has also seen a growth in warehousing employment over this period, noticeably above that for London as a whole.

• Forecasts indicate that employment in this sector will decline in Tower Hamlets over the period 2002 to 2014, as it will in London as a whole. This is likely to reduce the overall demand for warehousing space in the borough.

• Unemployment in Tower Hamlets has been gradually reducing since the mid-1990s, and now stands at 5.6%. This is above the average for London as a whole. However, unemployment in Tower Hamlets is expected to reduce to 2.9% by 2014.

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3. PROPERTY ASSESSMENT Introduction 3.1 Industrial property markets do not necessarily follow local authority boundaries. Nevertheless, local authorities are a primary unit of data analysis and so have been used as a basis for carrying out the property assessment. The primary focus has been to examine changes in the total stock of industrial floorspace, past development rates and the potential supply of property to meet future demand. This enables the implications of the re-development of Iceland Wharf to be better understood.

3.2 Whilst Iceland Wharf lies within Tower Hamlets, it is very close to Newham. In addition, the local industrial market is likely to extend beyond this immediate area, and so the boroughs of Barking and Dagenham, Hackney and Newham have been included in this core study area. It should be noted that the boroughs selected for analysis in this core study area comprise only part of the region as defined by the GLA for planning purposes. Reference to the wider East London market will be made as relevant.

3.3 We have also looked at Fish Island when examining the specifics of supply and demand of industrial property. This helps in establishing the suitability of the Iceland Wharf site in the overall industrial property market.

Change in Stock of Floorspace 3.4 The total stock of industrial floorspace has declined dramatically in London over the 20 years. This trend has happened nationally, however, although London has seen a greater relative level of decline, reflecting the points discussed under the Economic Context. This section examines trends in Tower Hamlets and the core study area, in order to assess patterns as they relate to the industrial market in East London.

3.5 In Tower Hamlets the reduction in total manufacturing stock over the period 1986 to 2004 was 55%. This compares to a decline of 45% for London as a whole (Table 3.1). The rate of decrease in the stock of manufacturing floorspace in Tower Hamlets is therefore greater than for London as a whole, and is the second highest of the surrounding boroughs. The rate of decline is also noticeably greater over the period 2000 to 2004 than other boroughs.

Table 3.1: Change in Stock of Manufacturing Floorspace in Core Study Area 1986 (‘000 2000 (‘000 2004 (‘000 (%) Change (%) Change sqm) sqm) sqm) 2000-2004 1986-2004 Tower Hamlets 1,189 724 532 -27% -55% Barking & Dagenham 2,158 1,096 882 -20% -59% Hackney 1,057 607 506 -17% -52% Newham 839 526 523 -1% -38% London 20,145 13,002 11,112 -15% -45% Source: Valuation Office, DETR, ODPM

3.6 Given that manufacturing employment has reduced at a relatively lower rate in Tower Hamlets than London, this suggests that there has been a rationalisation of manufacturing floorspace in Tower Hamlets – indeed in all the selected boroughs. This is reinforced by changes in notional average employment ratios for the borough across this period. This has reduced from an average 64 sq m per employee in 1986 in Tower

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Hamlets to 34 sq m at 2004. Even so, as will be discussed later, there is still a considerable supply of manufacturing floorspace in the borough – far in excess of realistic need.

3.7 Forecasts for employment, as discussed earlier, suggest continued decline. By analogy, the demand for manufacturing floorspace can be expected to reduce further in and across London, and particularly in Tower Hamlets. The rate of decline in floorspace stock may not be as great as witnessed over the period 1986 to 2004, but as the rate of decline in manufacturing employment is expected to be at least twice that over the last decade, there is still likely to be a noticeable reduction in the overall requirement for manufacturing floorspace in Tower Hamlets.

3.8 The change in stock in warehousing floorspace in summarised in Table 3.2 below. This covers the same geography as for the manufacturing floorspace analysis. This presents a slightly different picture to the manufacturing sector. Over the period 1986 to 2004 Tower Hamlets and Hackney saw a reduction in warehousing space, as did London as a whole.

Table 3.2: Change in Stock of Warehousing Floorspace in Core Study Area 1986 (‘000 2000 (‘000 2004 (‘000 (%) Change (%) Change sqm) sqm) sqm) 2000-2004 1986-2004 Tower Hamlets 1,099 678 738 9% -33% Barking & Dagenham 446 637 789 24% 77% Hackney 588 457 403 -12% -32% Newham 507 729 748 3% 47% London 18,270 14,874 16,030 8% -13% Source: Valuation Office, DETR, ODPM

3.9 However, there are some differences in the recording of warehousing space between the 1986 and 2000/2004 data sets that may make direct comparisons problematic, although the overall trend for a reduction in total stock is likely to still hold true. This trend reflects increased focus on reducing operational costs by warehousing and distribution organisations, as well as changes within the locational and business requirements of the sector, such as a focus on larger units at strategic locations.

3.10 Of interest, however, are changes over the period 2000 to 2004. Apart from Hackney, all the selected boroughs saw an increase in total stock of warehousing floorspace, as did London as a whole. This may reflect a trend to re-adjust to the loss of floorspace over the longer period (1986 to 2004) with more suitable stock. This pattern of growth may not continue in the longer term once the market has re-adjusted.

3.11 It was also noted in Section 2 that employment in the warehousing sector in Tower Hamlets is expected to reduce by 1% between 2004 and 2014, as it is in surrounding boroughs. The implication is that there is likely to be an overall reduction in floorspace stock to support this reduced employment base. However, the relationship between employment change and floorspace change in the warehousing sector is more volatile than for manufacturing, so the precise nature of the space requirement is difficult to predict accurately.

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Development Activity 3.12 The change in total stock, whilst showing the net change in property, does not illustrate the pattern of change across years. In other words, within a falling total stock of industrial floorspace, new industrial property development is likely to continue to take place. This will partially be as a result of demand from new start-up enterprises or expanding businesses, but also from the need to provide more suitable locations (both in specification and location) for businesses.

3.13 However, whilst this process is taking place there will also be a loss of existing industrial property to other uses, due to factors such as poor location or lack of demand for that type of property. This section looks at this change, or development rate.

3.14 Analysis of the take-up of floorspace over the past 5 years has been carried out. This therefore looks at the rate at which ‘completed’ property is occupied, along with the rate of occupation of available or ‘second-hand’ property.

3.15 It is important to note that analysis of development activity cannot easily distinguish between manufacturing and warehousing uses. Instead a global ‘industrial’ development rate is used as the basis of analysis.

3.16 In terms of Tower Hamlets, analysis of take-up since 2000 has been carried out, based on commercial property databases, and details are summarised in Table 3.3 below. This has indicated that the average take-up of industrial floorspace in Tower Hamlets has been approximately 3,800 sq m per annum. In the core study area the average take-up rate has been approximately 28,200 sq m per annum.

Table 3.3: Industrial Demand in Core Study Area (take-up, sq m)

Borough 2000 2001 2002 2003 2004 Annual Average

Tower Hamlets 7,774 3,614 1,607 3,458 2,532 3,797 Barking & Dagenham 7,523 17,150 10,900 10,312 14,908 12,159

Hackney 5,230 3,350 3,975 1,533 2,180 3,254

Newham 12,623 2,843 19,171 6,502 3,841 8,996

Total 33,150 26,956 35,654 21,805 23,461 28,205 Source: Focus, Pride, GVA Grimley

3.17 As discussed earlier, the level of take-up in Tower Hamlets is likely to be considerably less over the next decade, as it will in the rest of the core study area.

3.18 We consider below how much property is already available to cater for future potential demand - assuming the use of past development rates. As explained above, however, future development rates are likely to be considerably less than they have been over the last decade. Nevertheless, the analysis will – using this very cautious basis – identify the extent to which available property can satisfy demand.

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Floorspace Availability Assessment 3.19 Analysis of commercial property databases has indicated that in Tower Hamlets there is approximately 37,086 sq m of industrial property16 available (September 2005). In the core study area the availability figure is approximately 116,000 sq m.

3.20 On the basis of past take-up rates, as summarised in Table 3.3, then this amount of available property in Tower Hamlets is equivalent to almost 9½ year’s demand. In the core study area, the availability figure of 116,000 sq m equates to over 4 year’s supply based on past take-up rates in this area.

3.21 A point to note is that the above figures relate to property that is actively marketed. In practice there is a significant amount of space vacant or not being actively marketed in the core study area.

3.22 Evidence of this comes from the Greater London Authority (GLA), with their report Industrial and Warehousing Land Demand in London. This assessed the potential supply of industrial property across London. This examined both current vacant floorspace as at the end of 2003, and vacant land. This concluded that:

“With around 618 ha of vacant industrial/warehousing land, the East London sub- region accounts for around 72% of all vacant industrial/warehousing land in London. Newham and Tower Hamlets are the two largest contributors to this supply, with some 203 ha and 169 ha respectively.” p50

3.23 Further work has been carried out by the GLA into the adequacy of industrial land provision in East London, including Tower Hamlets. This is summarised in the Draft Sub Regional Development Framework (SRDF) for East London17. This re-states the need to release 500 ha of industrial land in this region between 2001 and 2016 (paragraph 102). In addition, the emphasis should be to retain industrial land towards the east of the region rather than the west (paragraph 103) – in other words, greater potential for releasing industrial land exists in the area in which Iceland Wharf is located.

3.24 Even so, the draft SRDF proposes that Tower Hamlets is categorised as a ‘managed transfer’ category in terms of the release of industrial land, primarily in relation to Strategic Employment Locations (SELs). The emphasis of the SRDF proposals, therefore, are that release of SEL sites in Tower Hamlets could be taken forward, but on the basis of meeting particular criteria, such as the distribution of vacant and occupied industrial land (paragraph 148).

3.25 A proposed list of SELs is provided in the SRDF, which includes Stratford. However, Iceland Wharf and the surrounding Fish Island area do not form part of a SEL. The implication, therefore, is that the release of industrial land at Iceland Wharf is not counter to the policy position outlined in the SRDF. In fact, the release of this industrial land could assist towards the requirement to achieve an overall reduction of 500 ha of industrial land in the region, and hence re-balance the land market in the area.

16 Source: Focus and site visits. The Focus database covers reported deals and marketed property. It is reported to cover approximately 75% of the industrial market. 17 Source: (May 2005) The London Plan. DRAFT Sub Regional Development Framework East London

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3.26 The available floorspace supply can also be broken-down between Fish Island – and the location of Iceland Wharf - and the rest of Tower Hamlets. The details are summarised in Table 3.4 below, along with the annual average take-up of industrial floorspace over the period 2000 to 2004 for Fish Island and the rest of Tower Hamlets. Note that the geographical definition of Fish Island used in preparing these figures is based on the description in paragraph 1.8 and illustrated in Appendix 1.

Table 3.4: Industrial Supply/Demand in Fish Island and Tower Hamlets

Location Supply Annual Average Take-up (sq m) Years Supply

Fish Island 16,914 405 42

Rest of Tower Hamlets 20,171 3,514 6 Source: Focus, GVA Grimley 3.27 From Table 3.4 it will be seen that there is a significantly greater relative (and absolute) level of industrial supply in Fish Island compared with the rest of Tower Hamlets. In fact, 44% of the total supply in Tower Hamlets is located in Fish Island, yet this area has only seen 10% of the take-up across the borough. This indicates that this area does not provide the type of property best suited to modern industrialists needs – a point reinforced through discussions with local property agents.

3.28 In fact, based on past take-up rates the current supply in Fish Island would provide approximately 42 years of supply. This is an under-estimate as the available floorspace figures listed above do not take account of the imminent availability of the Percy Dalton works in Fish Island, which may provide an additional 18,580 sq m of industrial floorspace, which would exacerbate the supply/demand picture even further in Fish Island. Neither does this notional supply figure take account of the decline in industrial employment forecasts across this area.

3.29 The available floorspace figures also exclude the former Courage Brewery distribution site of over 2 hectares to the north of Fish Island. This is a vacant site that appears relatively well suited to the requirements of industrial occupiers given its former use, potentially supplying over 10,000 sq m of industrial floorspace. However, the nature of development to be pursued at this site is under review pending decisions by the Olympic Games Committee.

3.30 An additional point to note is the supply of floorspace of comparable size to Iceland Wharf. Given realistic plot density ratios, Iceland Wharf could accommodate between 500 and 2,500 sq m of floorspace. Analysis of the available supply data (see Appendix C) shows that there is approximately 8,130 sq m of floorspace in this size range available in Fish Island. This takes no account of supply in this size range elsewhere in Tower Hamlets or further afield. In summary, there appears a substantial supply of alternative space in the size range occupied by Iceland Wharf, especially when it is noted that only one deal for space this size has been recorded in Fish Island over the last five years (see Appendix D).

3.31 As stated in Section 1, however, there is a further distinction that can be made in terms of Fish Island. This relates to the area north of Wick Lane/Crown Close (the traditional location of Fish Island), and the area to the south of this boundary. It should be stressed that we have taken a relatively tight definition of Fish Island, excluding areas just north of the Hertford Union Canal, for example, even though such areas can be viewed as part of

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the Fish Island complex. In that sense, therefore, the figures and findings outlined below should be seen as a ‘best case’ in terms of the opportunities associated with Fish Island.

3.32 In broad terms, the northern area of Fish Island is a generally reasonable/good industrial area, with reasonable quality buildings of various sizes, a good internal estate road distribution network, suitable parking and loading arrangements, and good access to the A12. The southern part of Fish Island, with a few exceptions at the Old Ford Trading Centre, can be characterised as poor quality in terms of building stock, access and parking arrangements, and are generally of low value/bad neighbour activities. This is where Iceland Wharf is located.

3.33 This distinction can be seen in terms of both the level of available supply in these two sub-areas of Fish Island, as well as the quality of available supply. Table 3.5 summarises the amount of available floorspace in the north and south of Fish Island, and the quality of this floorspace.

Table 3.5: Industrial Supply in Fish Island

Borough Current Supply Grade A sq m (%) Grade B sq m (%) Grade C sq m (%) (sq m)

North Fish Island 2,096 423 (20%) 1,672 (80%) 0 (0%)

South Fish Island 14,818 0 (0%) 4,135 (28%) 10,683 (72%)

Total 16,914 423 (3%) 5,807 (34%) 10,683 (63%) Source: GVA Grimley

3.34 From Table 3.5 it will be noted that there is a considerable amount of available floorspace in the southern part of Fish Island – almost 90% of the total in fact. These figures exclude the imminent availability of the Percy Dalton site in the north of Fish Island (18,580 sq m), which would potentially offer property better suited to certain industrialists needs than the currently available property in south Fish Island.

3.35 A further point concerns the quality of the available stock in Fish Island. It will be seen from Table 3.5 that the quality of space in the southern part of Fish Island is much poorer in quality than that in the northern part of Fish Island. Almost three-quarters of available space in southern Fish Island is classed as Grade C (Poor), with the remainder in Grade B (Average). Therefore, not only is there a considerable amount of over-supply of industrial floorspace in south Fish Island relative to historic demand, but the quality of this space is generally poor and likely to be unsuitable to occupiers needs.

3.36 A number of these available properties have been vacant/on the market for a considerable amount of time, although it appears that some have been taken off the market in response to the uncertainty associated with the Olympics or there lease terms have been changed to more short-term letting. Many of the other available properties are of ageing design and layout, with increasingly high maintenance costs, with limited scope to adapt to meet modern occupiers requirements.

3.37 In summary, actively marketed industrial floorspace in Tower Hamlets provides approximately 9½ years supply of industrial property. This reinforces the conclusion, based upon GLA evidence, that there is a relatively high level supply of property in quantitative terms in the borough.

GVA Grimley Page 13 Iceland Wharf Economic and Employment Study

3.38 In terms of Fish Island, and particularly the southern part of the area which is where Iceland Wharf is located, the availability levels relative to past demand levels indicate that there is a considerable amount of over-supply. This reflects factors such as the generally poor quality of many of the available sites in Fish Island and their unsuitability for occupiers needs.

Market Demand 3.39 In general, Fish Island has moved from a mixed industrial area, with manufacturing, storage and small scale distribution, to much lower density and value uses, such as vehicle and waste storage, and generally small-scale enterprises – particularly so in the southern part of Fish Island. Site access, parking and building quality is generally poor in the southern part of Fish Island in terms of modern industrial needs.

3.40 This point is substantiated by the fact that, despite a substantial supply of available floorspace in Fish Island, there has been relatively little take-up of such space over the last five years. This reflects a number of factors, including the quality of supply, but also the nature of demand from sectors that are seeking floorspace, a point supported by local property agents.

3.41 The property needs of modern industrial activities will vary depending upon the specifics of the industrial activity in question. However, a generic list of ideal site requirements covers the following factors:

(a) No/few onerous planning or building regulations, i.e. height.

(b) Close (but not too close) to good labour and support facilities.

(c) Adjoining other complementary businesses.

(d) Room on existing site for expansion.

(e) Low cost, relative to business operations.

(f) Good 24 hour access to trunk roads.

(g) A 24 hour working environment.

(h) Uncontaminated with reasonable/high degree servicing.

(i) A range of site/property sizes.

3.42 In practice industrial enterprises have to adapt to the practicality of particular market conditions, but the further away an organisation moves from the above factors the greater potential inefficiency there is in terms of business operations and land use. In terms of Fish Island, the northern part of this area satisfies a number of the above factors to a certain extent, such as (b) labour supply, (c) complementary businesses, (f) road access, (g) 24 hour work environment and (i) uncontaminated in particular. However, the southern part of Fish Island is generally less suitable, mainly satisfying factors (b) labour supply, (c) complementary businesses and – currently – (f) road access.

3.43 The adequacy of the quality and quantity of property will be strongly influenced by the nature of demand for industrial property in the area. As demonstrated earlier, the overall level of demand for space in Fish Island has been relatively low, and well below the level GVA Grimley Page 14 Iceland Wharf Economic and Employment Study

of provision of available floorspace. In addition, the potential demand sectors in the industrial market in this part of London have been examined, so as to assess the suitability of Fish Island and Iceland Wharf in accommodating this demand.

3.44 In general, three broad categories of industrial demand can be identified for this part of London. These are summarised below and have been based, in part, on discussions with local property agents :

• Manufacturing processing (e.g. printing, engineering, food production)

• Distribution/servicing:

- Studio/workshop servicing (e.g. publishing and design; start-up enterprises) – generally no/limited specialist property requirements.

- City/Docklands distribution support services (e.g. computer and IT support; catering preparations and supplies; office equipment supplies, retail storage) – generally some specific property requirements, such as eaves height, floor levels and loadings, etc.

• Bad neighbour/low value activities (garages; breakers yards; waste transfer; open storage)

3.45 Demand for manufacturing related space in Fish Island is very limited, with increasing emphasis on existing activities looking to locate elsewhere, as illustrated by Percy Dalton. Future demand from this sector is likely to decline given the structural changes that are happening in this sector across the UK.

3.46 There has is also limited relative potential demand arising from the two particular sub- sectors of distribution/servicing listed above. In terms of the City/Docklands distribution related support services, these activities are likely to see northern Fish Island as more suitable to their property and location needs. However, many occupiers servicing the City and Docklands are looking for relatively large (above 2,000 sq m) units with specific property features (e.g. 10 metre plus eaves height) and for locations further south, such as Poplar Industrial Estate, so the likelihood of take-up here is relatively small.

3.47 Both the northern and southern parts of Fish Island could be suitable for studio/workshop types activities, although actual levels of demand are likely to be relatively low as this is not a fully established market in this area yet. However, the unit sizes developed for this sector in this area – under 100 sq m – have attracted interest from occupiers.

3.48 Demand from bad neighbour/low value activities is also relatively limited, although greater than that for the manufacturing and distribution/servicing sectors. However, the Olympic proposals have been distorting matters over the last six months by creating displaced demand, particularly from lower-grade occupiers. This includes the motor trade sector, with demand focussed on the 150-450 sq m range, although the emphasis is upon small (under 200 sq m) units.

3.49 Most potential occupiers from this sector can be characterised as requiring short-term lease arrangements, low occupational costs and providing weak covenant strength. Currently parts of the southern area of Fish Island are occupied by such activities, although the efficiency and effectiveness of having land in such use in this location in

GVA Grimley Page 15 Iceland Wharf Economic and Employment Study

London is questionable, particularly as most of these uses are not highly geographically sensitive.

3.50 In summary, there is very limited demand for accommodation in Fish Island, with most of the enquiries coming from motor trade related activities. This current potential demand – as expressed through enquiries with local agents – is artificial in many respects, as it is resulting from ‘deferred demand’ due to re-locations associated with the Olympics. In addition, the quality of stock at Fish Island – particularly south Fish Island – is poor and so would be likely to limit actual take-up of space. Furthermore, it should be recognised that the enquiries for accommodation are not limited to Fish Island: this is just one location forming part of the search strategy of potential occupiers.

3.51 In terms of the Iceland Wharf site itself, the existing accommodation is of poor quality with very low employment density levels. The existing buildings are pre-War, with a number of portable accommodation units, and are unsuitable for modern occupiers’ requirements. The site also slopes considerably towards the River Lea, which constrains the type of industrial operations that can operate effectively on the site. Access into and out of the site is also constrained by the width of the approach road and location of the site entrance. (See Appendix 2 for a selection of photographs of the site)

3.52 The width and depth at the eastern edge of the site is broadly adequate as a turning area for articulated vehicles, although loading/unloading arrangements are problematic. However, there is a range of activities currently in operation in this area that prevents this happening effectively at the moment. In its current form the site is poorly suited to the needs of modern industrial activities.

Summary • Over the longer-term (1986 to 2004) industrial floorspace (both manufacturing and warehousing) has seen an absolute reduction in Tower Hamlets – and at a greater rate than London as a whole.

• The reduction in total industrial floorspace has also been the highest of the four boroughs in the core study area.

• Over the period 2000 to 2004 the stock of manufacturing floorspace continued to decline in Tower Hamlets. The stock of warehousing floorspace increased over this period in Tower Hamlets, although this is still a third less than it was in 1986.

• However, future development rates are expected to be less than in the past as overall total employment in the industrial sector in Tower Hamlets is expected to reduce.

• Take-up of industrial floorspace between 2000 and 2004 was 3,797 sq m per annum in Tower Hamlets. This includes take-up of new space and second-hand space.

• There is currently 37,085 sq m of available industrial space in Tower Hamlets. When compared against the take-up figure of 3,797 sq m per annum, this indicates that there is approximately 9½ years of immediately available space in the borough to satisfy short-term requirements.

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• If this available floorspace was added to the vacant land identified as at December 2003 for the GLA, then there could be approximately 137 years of industrial supply in Tower Hamlets.

• In Fish Island, which is where Iceland Wharf is located, there is a significant amount of available industrial space, much of which is in poor quality. Based on past take-up rates in Fish Island, the current amount of available space in Fish Island would provide approximately 42 years supply. However, the poor quality of much of this space means that many of these sites are unlikely to be occupied in the foreseeable future.

• The rest of Tower Hamlets provides a more varied range of sites in terms of quality and size. Even excluding the Fish Island available property from the analysis, there is still approximately 5 years supply of industrial floorspace to satisfy the industrial requirements of Tower Hamlets.

• Iceland Wharf itself is a poor quality site, which does not lend itself to the needs of modern industrial occupiers.

• The analysis of industrial land supply and demand in Tower Hamlets and Fish Island, linked with the economic analysis, indicates that the loss of 0.6 hectares of industrial space at Iceland Wharf is unlikely to have any significant impact upon the industrial market in the area.

GVA Grimley Page 17 Iceland Wharf Economic and Employment Study

Appendix A: Location Map of Fish Island

Core Fish Island covered in the statistical analysis.

GVA Grimley Page 18 Iceland Wharf Economic and Employment Study

Appendix B: Photographs of Iceland Wharf

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Appendix C:Available Industrial Property Schedule (Tower Hamlets)

Building Park Street Street Name Use Sq m No Available 36 Road Industrial/Warehouse 538 34-48 Brodlove Lane Industrial/Warehouse 821 11 Bow Industrial Park Carpenters Road Industrial/Warehouse 1,074 92-108 Cheshire Street Industrial/Warehouse 1,052 255-259 Commercial Road Workshop 372 11b & Dock Street Warehousing 712 11c Unit 1 Empson Street Industrial/Warehouse 1,305 37 Heneage Street Industrial/Warehouse 122 Devon Wharf And Devon Cottage Leven Road Industrial/Warehouse 402 Unit 2 Maverton Road Industrial/Warehouse 663 Unit 4 Maverton Road Industrial/Warehouse 565 Units 1 & 2 Old Ford Trading Maverton Road Warehousing 663 Centre Units 1 & 2 Old Ford Trading Maverton Road Industrial/Warehouse 2,244 Centre Lutomer House 100 Prestons Road Industrial/Warehouse 1,297 Unit 1 Victoria Park Industrial Centre Rothbury Road Industrial/Warehouse 186 Unit 5-6 Victoria Park Industrial Estate Rothbury Road Industrial/Warehouse 317 20 Rothbury Road Industrial/Warehouse 905 3 Vine Court Factory 372 2 Bow Exchange Yeo Street Industrial/Warehouse 668 Unit 3 Bow Exchange Yeo Street Industrial/Warehouse 668 1 Jersey Street Light Industrial 186 Devon Wharf And Devon Cottage Leven Road Industrial/Warehouse 402 Unit 9 Blackwall Trading Estate Portree Street Industrial/Warehouse 629 8 Blackwall Trading Estate Portree Street Industrial/Warehouse 515 7 Blackwall Trading Estate Portree Street Industrial/Warehouse 689 Unit 9 St Andrews Way Warehousing 1,552 Unit 6 Queens Yard Industrial Unit 951 Unit 3 Queens Yard Motor Repair Unit 209 Crown Close Multi story office and stores 2323 Unit 3 Hamlet Industrial Centre Industrial Unit 212 Unit 1 Hamlet Industrial Centre Industrial unit 212 Wallis Road/Main Yard Workshop/Store 1403 86a Wallis Road 1st floor factory 645 9 Queens Yard Studio 1st floor 74 Trego Road Industrial Unit 1.95 acres 5 Prince Edward Road Studios 186 45-51 Wallis Road Workshop 743 55-57 Wallis Road Studios 186 14 Felstead Road Factory and stores 1394 35 Monier Road Factory and offices 1672 Wick Lane Factory and offices 8361 Percy Daltons To vacate Factory 18580 Total (exc Percy Daltons, ex Courage Brewery Site, and Trego Road 37,086

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Appendix D: Industrial Property Take-up Schedule (Tower Hamlets) Year Street No Street Use Code Size sq m

3-5 Hayfield Passage LIGHT INDUSTRIAL 195 Carpenters Business Carpenters Road BUSINESS PARK/UNIT: GENERAL 2,337 Park INDUSTRIAL 2004 2,532

Victoria Park Industrial Rothbury Road WAREHOUSING 211 Centre Carpenters Road GENERAL INDUSTRIAL 472 Carpenters Road GENERAL INDUSTRIAL 1,084 465-467 LIGHT INDUSTRIAL 221 Thomas Road GENERAL INDUSTRIAL 1,230 10 Poplar Business Park Prestons Road B1 OFFICE/BUSINESS: BUSINESS 240 PARK/UNIT: GENERAL INDUSTRIAL 2003 3,458

25 Hackney Road B1 OFFICE/BUSINESS: LIGHT 520 INDUSTRIAL: OFFICE Thomas Road LIGHT INDUSTRIAL 1087 2002 1,607

59 Cudworth Street LIGHT INDUSTRIAL 60 47-53 Dace Road SHOWROOMS: WAREHOUSING 1812 5 Payne Road B1 OFFICE/BUSINESS: GENERAL 372 INDUSTRIAL: OFFICE Carpenters Road GENERAL INDUSTRIAL 256 12-14 Calvin Street WAREHOUSING 929 63-65 Dove Row LIGHT INDUSTRIAL 185 2001 3,614

9 Newell Street LIGHT INDUSTRIAL 219 8 Newell Street LIGHT INDUSTRIAL 309 Carpenters Road GENERAL INDUSTRIAL: LIGHT 363 INDUSTRIAL: WAREHOUSING 36-42 New Inn Yard WAREHOUSING 878 11a Dock Street GENERAL INDUSTRIAL: LIGHT 348 INDUSTRIAL: WAREHOUSING 10 LIGHT INDUSTRIAL 236 229 Heath Road WAREHOUSING 903 9 Yorkton Street WAREHOUSING 415 5 Yorkton Street WAREHOUSING 326 7 Yorkton Street WAREHOUSING 378 3 Varden Street LIGHT INDUSTRIAL 70 75-83 Fairfield Road GENERAL INDUSTRIAL: LIGHT 3,329 INDUSTRIAL: WAREHOUSING 2000 7,774

18,985

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