Industrial land: policy E7 and no net loss of capacity
London industrial land policy starts from retention, not release. Here is how the capacity test works, what intensification and co-location mean in practice, and the evidence a borough will expect before it accepts any loss.
Industrial land London policy starts from retention, not from a free-running planning balance. The London Plan designates Strategic Industrial Locations, asks boroughs to designate their own industrial sites in local plans, and then applies a no net loss of industrial floorspace capacity approach across the designated stock. So if your site carries a designation, the question a borough asks is arithmetical before it is anything else: how much usable industrial floorspace exists now, how much will exist afterwards, and who makes up the difference. Design quality does not answer that question.
That framing catches developers out. A scheme can be well planned, policy compliant on housing mix, and still fail because the capacity sums were never set out.
How industrial land is classified in London
Three tiers sit on top of each other. Strategic Industrial Locations (SIL) are the London-wide designation, identified through the Plan and mapped in borough local plans. Locally Significant Industrial Sites (LSIS) are designated by each borough for sites that matter locally but do not reach strategic scale. Everything else is non-designated industrial land, which still counts towards borough capacity even though it carries no label on the policies map.
The uses themselves cut across the Use Classes Order. General industry sits in Class B2 and storage or distribution in Class B8, both outside the flexible Class E. Light industry, though, falls within Class E(g)(iii), so a light industrial unit can become an office or a gym without planning permission. That single quirk explains a lot of borough behaviour. Conditions restricting a permission to B2 or B8, or removing Class E flexibility, are now common on industrial consents, and officers will ask for them.
Waste management, utilities, aggregates handling, concrete batching and some transport functions are sui generis. They are also the hardest capacity to replace, which is why boroughs treat waste sites and safeguarded wharves differently from a shed let to a courier firm.
Strategic and local designations
Inside a SIL, the starting position is that development should be for industrial, logistics and related uses. Residential development is not an appropriate use, and an application that proposes it is arguing against the designation rather than within it. The practical route to change on a SIL is a plan-led one: a Plan review, a local plan allocation, or an adopted masterplan that has already identified a boundary change or a co-location area.
LSIS protection is weaker but real. The borough set the boundary, the borough can review it, and the evidence base that justified it is usually a published employment land study. Reading that study first is the best hour you will spend on the project, because it tells you whether the borough thinks it has a surplus or a shortfall.
Non-designated land is where most releases happen. Even there, expect a policy requiring replacement floorspace or a marketing exercise.
The no net loss principle
The Plan groups boroughs by what is expected of their industrial stock, running from boroughs that must provide additional capacity, through those that must retain what they have, to those where limited release is accepted. Those categories change at each Plan review, so verify which one applies before you commit to a strategy. The direction of travel across London has been towards tighter protection, driven by last-mile logistics demand and by the loss of industrial land to housing over the previous two decades.
Capacity, importantly for scheme design, is floorspace capacity. Not hectares. A site of 0.4 hectares occupied by a single-storey shed of 1,800 m² can be rebuilt as a two-storey unit with a mezzanine and a shared service yard, giving more floorspace on less land. That is the mechanism the Plan wants you to use.
An illustrative capacity comparison
Take a hypothetical 0.6 hectare LSIS plot in outer London with three ageing single-storey units. This example is illustrative only, but it shows the shape of the argument.
| Position | Industrial GIA | Site area used | Net capacity change |
|---|---|---|---|
| Existing | 2,400 m² | 0.60 ha | baseline |
| Redevelopment, single storey | 2,000 m² | 0.45 ha | loss of 400 m² |
| Redevelopment, two storey with yard sharing | 2,900 m² | 0.42 ha | gain of 500 m² |
Only the third option passes a no net loss test, and it does so while freeing 0.18 hectares for other uses. The borough will then test whether the retained floorspace is usable in practice: yard depth, clear internal height, loading door count and service vehicle tracking all matter more to an occupier than the headline area.
Intensification and co-location
Policy on intensification, co-location and substitution gives three mechanisms. Intensification raises floorspace on the same land, usually through multi-storey units, basements for parking or deck-over structures. Co-location puts industrial floorspace and homes on the same site, with the industrial element typically at ground and first floor and residential above or alongside. Substitution provides replacement capacity on another site so the London-wide total holds.
Co-location is the one that generates refusals. The industrial occupier needs 24-hour access, reversing HGVs, plant on the roof and no constraint on noisy activity. The residents above need sleep. Making both work takes a separated service yard with its own access, acoustic separation at the structural level rather than in the glazing, independent cores, and a management regime written into the section 106 agreement. Councils usually expect a suitably qualified acoustician to author the supporting Noise Impact Assessment, and professional review of any draft is strongly advised, because the agent of change principle puts the burden of mitigation on the incoming residential use.
Get the yard wrong and the industrial floorspace becomes unlettable. Then you have delivered capacity on paper and lost it in practice, which is exactly what the policy is written to prevent. Our note on optimising site capacity under the design-led approach covers the residential side of the same calculation.
Evidence needed to justify release
A release case is an evidence case. At minimum, assemble floorspace schedules for the existing and proposed positions on a consistent measurement basis, a capacity statement explaining why the retained floorspace works for a real occupier, marketing evidence covering a meaningful period at market rents, vacancy and lease data, and a relocation strategy for existing tenants naming the receptor sites you have identified.
If you are relying on substitution, the receptor site has to be real, available and tied to the loss by obligation. A commitment to replace floorspace at a site to be identified later will not be accepted.
Site constraints help where they are genuine. Poor access through a residential street, a site too shallow for modern service vehicles, contamination that makes industrial reuse uneconomic: all of these have carried weight, provided they are evidenced rather than asserted.
Employment land assessment expectations
Boroughs will read your capacity evidence against their own. An Employment Land Assessment should set out the local supply position, the demand picture for industrial and logistics floorspace, the quality of the existing stock, and what the proposal does to each. Where your conclusion differs from the borough's published study, say so directly and explain why, rather than hoping the difference goes unnoticed. Officers read both.
Where release is accepted
Release tends to succeed in four situations: where the borough sits in a limited-release category and the local plan says so, where the site is non-designated and clearly unsuited to modern industrial use, where substitution delivers equivalent capacity on an identified site, and where an Opportunity Area framework or adopted masterplan has already planned for change. Outside those, the case is uphill. Our companion piece on no net loss and SIL policy sets out the designation hierarchy in more detail.
This is general guidance rather than legal advice. Check the position with the borough and with a qualified professional before relying on it, because designation boundaries and borough capacity categories change at each plan review.
Enter your postcode on PlanScope to see which reports a site is likely to need before you commit to a capacity strategy. PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval.
Frequently asked questions
Does the no net loss principle apply to a site that is not designated?
Often yes, in a different way. Non-designated industrial land still counts towards a borough's industrial floorspace capacity, so a local plan policy may resist its loss even without a Strategic Industrial Location or LSIS designation. Check the borough's own employment land policy and its most recent employment land study, because the protection comes from those documents rather than from the designation itself.
Can housing ever be built on a Strategic Industrial Location?
Only where the London Plan or an adopted local plan or masterplan has already identified that part of the designation for change. Promoting housing on a SIL through a planning application alone is the hardest route available, because the designation exists to keep the land in industrial use. Most residential co-location happens on LSIS or on non-designated industrial land.
How is industrial capacity measured for the test?
By floorspace capacity rather than by site area, usually expressed as gross internal area in square metres and compared before and after. That is why multi-storey and deck-over schemes can work: they release part of a site at ground level while raising total floorspace. Boroughs will also look at yard depth, headroom and vehicle access, because floorspace alone can overstate usable capacity.
What is substitution?
Substitution means providing replacement industrial capacity somewhere else so that the London-wide stock does not fall. It usually needs a specific receptor site, a delivery mechanism and a planning obligation that ties the new capacity to the loss. A general promise to replace floorspace at an unidentified location will not satisfy a borough or the Greater London Authority.
Which reports does an industrial release scheme usually need?
Expect an Employment Land Assessment or equivalent capacity statement, a noise assessment where homes and industry sit close together, a delivery and servicing strategy, and a transport assessment if the scheme crosses the usual thresholds. Heritage, daylight and air quality work follows from the site. The borough's validation checklist is the document that decides the final list.
Sources and further reading
This article is general guidance about the planning system in England and, where stated, the rest of the UK. It is not legal or professional advice. Check your local planning authority’s validation requirements and take professional advice for your specific site.