Comment on Planning Policy Statement Consultation from CLG

The consultation period relating to a proposed consolidation of a number of Government Planning Policy Guidance and Statements comes to an end on 28 July.  This consolidation is an attempt by Government to streamline and simplify Government Policy relating to non-housing development in towns and the countryside in order to stimulate economic development and provide developers with more certainty as to the eventual outcome of Planning Applications.

The ministerial forward by Margaret Beckett emphasises that “development plans need to have clear proactive, proportionate and flexible policies aimed at supporting the start up and growth of businesses, attracting inward investment and increasing employment particularly in deprived areas”.  Regrettably it singularly fails to do this.

The planning system is a key lever the Government has to contribute towards improving economic performance but it is recognised in the introduction to the proposed policy consolidation that “if it is not based on an understanding of the needs of business it can also represent a barrier to employment and productivity growth”.  Whilst recognising all of this the consultation, entitled Planning for Prosperous Economies, completely misses the point when it comes to establishing policy for areas such as the North East, much of which is considered to be “disadvantaged”. 

In general terms the consolidation of a number of different policy statements is clearly to be welcomed but it does not go far enough.  All planning policy is linked in some way or another and there is certainly a requirement for all the relevant issues to be consolidated into one document but by omitting housing which is an integral part of planning for a prosperous economy and at the same time referring to and yet not fully engaging separate policies in relation to climate change appears to be an opportunity missed.  It is also relevant to note that this is the third consultation in less than 2 years on the same subject.

The problem will all of this is that the Market which drives economic prosperity is at the bottom of the process not where it should be, at the top.  Instead we have Statements of Principle, Regional Spatial  Strategies, Local Development Frameworks establishing policy based on market information which is always by definition going to be out of date.  Whilst a need for flexibility is recognised, in practice when faced with a judgement call that does not fit into the proscribed boxes the system becomes confused in considering all the relevant aspects.  In the end the matter becomes process driven, success being measured by the proper application of process rather than on the end result of bricks and mortar on the ground. 

In the North East we are desperately in need of a more relaxed attitude to development of all sorts.  The legacy of Enterprise Zones has on the whole been a good one and similarly, so have the results of the Development Corporations.  Both these Government initiatives concentrated upon delivery of investment in specific geographic areas.  It is now inconceivable to think of the North East without developments such as Newcastle Business Park, Team Valley, Sunderland Enterprise Park and Riverside Park, Middlesbrough.  The cultural benefits delivered by Newcastle’s East Quayside and Stockton’s Riverside Park, both of which brought life back to their respective rivers is unquestioned.  How did this happen?  It happened because planning policy was less stringent and there were less hurdles to cross.  Put simply, they demonstrated a time when Government was prepared to relax its myriad of rules and programmed itself to say “yes” trusting entrepreneurs, investors and businesses in this region to deliver.

The Government should find mechanisms to enable those circumstances to return. 

For many Landlords and Tenants the only point of contact during a lease is when the rent comes to be renegotiated and during recessionary times the matter is all the more contentious and difficult. Generally, Rent Review Surveyors are having a tough time trying to set rents in the latter part of 2008 and 2009, the public view being that overall, values have fallen, but it is the role of the Surveyor to determine the extent of the decline and arrive at a figure based on market evidence. It is the lack of evidence in the market place that makes establishing and supporting a revised rent particularly difficult.

It is clear that rent reviews falling due between the end of the first quarter of 2008 and now are being fiercely fought.  This is not only because money is tight but also because comparable market evidence is hard to find. In any property market cycle a decrease, or for that matter any increase in value first shows itself in a rise or fall in enquiry levels with the actual transactional evidence that supports the trend lacking some way behind. In this cycle rents peaked towards the end of 2007 reflecting the hitherto booming economy, notwithstanding the banking crisis that was then becoming increasingly evident. For all subsequent rent reviews, the question is where were rents in this particular cycle at the review date the lease has set? Rising, certainly not. Falling? Probably, but when did they begin to fall and how dramatic is the slump? What reliance can be given to evidence on either side of the actual rent review date?

Naylors are currently involved in negotiating rent reviews on a number of properties in the Region with rent review dates falling due over the last year. In cases without the benefit of any directly comparable evidence it is therefore a matter of judgment, gained from an understanding of the market and the type of asset being valued to interpret how the market value has shifted since the rent was previously set. 

A tenant will argue that the drop in rental value has been dramatic and the landlord will argue that rent has actually risen since the last review, often five years ago. We can see this point being particularly contentious leading to an increased number of Arbitration proceedings.  Parties should be cautious taking the third party route as they will have less control on the outcome and we believe a more sensible approach would be for landlords and tenants to reach a common ground, after all each rent review instruction is largely a process of negotiation!”

By Tim Rodgers,

Associate Director, Naylors Chartered Surveyors

There have been some encouraging signs that some end users are willing to look at space once again after sitting on their hands for 6 to 12 months ago. 

That said general enquiry levels have dropped over the last few weeks to a level we hope has now stabilized.  It is evident the void numbers on small industrial space in the region has increased in the market whereas 6 to12 months ago space of this size, particularly in prime industrial areas, was hard to source.

Quite a number of tenants are going out of business or serving notices on landlords to quit under the terms of their flexible tenancy agreements. 

The banking crisis has not helped the situation with money not getting filtered through the system to keep small businesses afloat.  We are confident though that void levels for this type will decline once money starts filtering back through the system and confidence comes back to the consumer.

The regions industrial space over 20,000 ft² continues to be difficult and whilst some landlords and Funds are particularly flexible on both rent and lease terms in order to secure a tenant and in a lot of cases to mitigate the rates liability, some occupiers are less enthusiastic as they do not know what lies ahead in the short term. 

Rent reviews and lease renewals within some landlords portfolios will no doubt be damaged by what is happening in the current climate but landlords and tenants are trying to see this difficult period through.

If we try and look beyond the current issues we face and to new industrial development which will no doubt be in demand, where will this take place and when?   

Some demand is evident from places such as Buildings for Business’ new Queens Court scheme on Team Valley, Gateshead, where all the industrial space is now let, sold or under offer. 

We will be guided on this only when the banking system eases and confidence returns and developers will again look at those potential schemes that were put on hold.  When they do, there will likely be a lack of supply until 2011 and beyond. 

Keith Stewart

Director