What next for our employment spaces and the workers in them?

07 Oct 20

With a decline in demand for offices – which is likely to hit older stock hardest – and other types of commercial space including retail and leisure – we need to make effective use of our buildings. The obvious answer is residential, but this won’t always be easy or practical. Where sustainable dwellings can be provided authorities should be encouraged to allow change of use.

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These past six months have seen some of the fastest changes for a decade in the way we use employment floorspace. Online retailing has risen from 18% of spending in 2018 to 27% in August 2020. At the same time offices in August only saw one third of workers returning to their workplace, leaving large swathes of space empty, as well as increasing retail and leisure vacancies. The new planning ‘E Class’ designation is now in effect and it opens up a new approach to managing commercial space flexibly in town centres but presents challenges elsewhere. As Iceni launches a new Economics Team this week we reflect on the challenges and opportunities for our employment spaces and what we need in the future.

Since 2015 the UK warehousing market has been tight, with vacancy of around 5%, the minimum necessary allowing for churn and choice. COVID19 has driven up logistics requirements with a huge rise in e-commerce fuelled by a doubling of online grocery deliveries. This is unlikely to be a blip but a structural change in the way we shop. As well as last mile deliveries, an increase in ‘mega sheds’ is needed for stock holding and to ensure that buildings are capable of being fitted out for new technologies.

The good news is that more warehouses means more jobs. Amazon alone are creating around 10,000 in the UK in 2020. Logistics jobs can be underrated too – as the Prologis 2018 survey showed, around half of logistics workers are managers or office based rather than drivers or operatives. This may be a lease of life for many of those unemployed as a result of COVID.

In parallel, we have seen an almost collapse of our office markets – temporarily. It is of course too early to fully predict the long run effects but when looking at the long term we expect the ratio of desks to workers (floorspace per employee) to fall, to reflect more frequent working from home. Both businesses and planning authorities thinking about future needs should start to test what this means in practice.

With a decline in demand for offices – which is likely to hit older stock hardest – and other types of commercial space including retail and leisure – we need to make more effective use of our buildings. The obvious answer is residential, but this won’t always be easy or practical. Where suitable and sustainable dwellings can be provided authorities should be encouraged to allow change of use.

One last thing… the new Class E presents a positive step forward in supporting our town centres by allowing movement between the previous A class and (some) B use classes. For those of us involved in industrial developments we do need to ensure that the supply of light industrial space (former B1c) can be maintained and protected under the new use class order. Don’t throw the baby out with the bathwater!

Matt Kinghan Director,Economics