Beds & sheds, or beds vs sheds?

03 Aug 22

Rising industrial values are mostly likely to affect existing industrial or other kinds of brownfield or commercial sites.

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The rapid growth in demand for industrial units, fuelled by the pandemic and the consequent rise in online retailing, is well documented. With recent reports[1] suggesting industrial values are threatening residential values in some areas, does this pose a real challenge to the delivery of new homes? Or are there other solutions to meeting industrial demand?

All the indications are that there is a desperate need for more sheds throughout the country and this trend is set to continue. It is not just new space for last mile delivery services that is needed but also for dark kitchens, data centres, film studios and for the other businesses affected by industrial losses.

Rising industrial values are mostly likely to affect existing industrial or other kinds of brownfield or commercial sites. Authorities looking to release industrial land to deliver their residential targets, are therefore most at risk to having their strategy undermined.

In reality, the strength of demand for industrial land is unlikely to put a big dent in overall housing delivery numbers; however, it could lead to a significant delay in the delivery of some residential sites. And there will be sites where the size of plot and access to the network make sense for industrial redevelopment rather than residential.

So, if we don’t want to lose new homes for new sheds, what other solutions are there?

Firstly, we are finally seeing a handful of multi level industrial schemes become viable which means better use of existing land. BeFirst (Barking and Dagenham) are pressing ahead with Industria (https://yourcall.befirst.london/industria) now under construction, and SEGRO look set to go ahead with their V Park in Brent. But stacked industrial schemes are very sensitive to land value due to the high delivery costs.

Secondly, London’s (and England’s) land scarcity is a product of the Green Belt. Local authorities need to be brave and recognise that sometimes industrial development really is important to our way of life, something we have seen the London Borough of Hounslow be particularly receptive to in their emerging Local Plan.

If you’re interested in industrial, then look out for Iceni’s forthcoming research ‘Logistics 2022’ where we will be talking about just how sustainable, (socially) valuable and skills hungry the sector is.

[1] See Savills comments at https://www.savills.co.uk/insight-and-opinion/savills-news/329995/residential-sites-in-london-at-risk-as-industrial-land-values-soar–says-savills

Matt Kinghan Director,Economics