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London Mayor’s Office Warns That Logistics Boom Could Threaten Housing Supply

London Deputy Mayor Jules Pipe

One of London’s deputy mayors has warned that the surge in the value of last-mile logistics assets could reduce the number of homes built in and around the UK capital. 

Speaking at a meeting of the London Assembly’s Planning and Regeneration Committee last week, Deputy Mayor for Planning, Regeneration and Skills Jules Pipe said that the rise in logistics values meant that developers were at a point where they might start to build industrial sites rather than homes on land they own, OnLondon reported.

“It’s getting to the point now where logistics space is worth more to a developer than using that land for housing,” Pipe said. “It’s giving London a real problem. In an ideal world we need to see lots of spaces for combining last mile deliveries, with 100% electric vehicles.”

The comments highlight the incredible reversal the growth in e-commerce deliveries has precipitated in the real estate world, where industrial assets, even in urban locations, used to lag far behind residential, retail and offices in terms of rents and values. 

In October last year, Segro paid a yield of 2.58% for a logistics asset in Canning Town east London. Prime rents on Bond Street, London’s fanciest retail street, are not much lower, at 2.51%. 

Pipe made the point that London needs more logistics assets, but it needs more affordable housing, too. 

At the same meeting, he said planning rules put in place by Mayor Sadiq Khan had succeeded in increasing the average proportion of new developments given over to affordable housing, OnLondon reported.

Under the rules, if a scheme offers 35% affordable housing, it receives fast-track planning and the developer does not need to provide an assessment showing why the project would be unviable if more affordable housing was included. 

Pipe said large schemes referred to the mayor’s office now contained an average of 41% affordable housing, compared to 15% when Khan took over in 2016. 

But, he added, the private sector can't build the affordable housing that London needs on its own and local authorities need to be given the means to build more housing themselves.