It would be good if for example you are at a resource extraction site that the local chat expands enough (maybe 1 light second) so that all players there hear it. If you have 20 players in one place, and 20 players in another, there is nothing keeping one player from flying over there and joining your instance seamlessly. Of course that is a rather contrived example and we don't really know how well the instancing will work.
I'm am fairly sure it would NOT work well: If a player isn't already in your instance, the chances of him/her joining your instance (rather than one of many others at the same location) is fairly low when you have 100,000+ players (and that's just for Beta). That's why I said it would only make sense for local chat to be with other people in your instance.
OTOH, maybe Frontier could add a feature where you clicked on a player's name, and your ship tried to "locate" where they were transmitting from (to use an in-game explanation familiar to any sci-fi fan). If the game found they were in a suitable instance (which you would be allowed to join) then you would see their location & the server would reserve space in their instance for you (for a limited time, say 10 minutes). If you went to that player's location within the allotted time, the server would put you in their instance (assuming it still existed). That would be awesome.
I guess you would then have two chat options, one for your instance (aka "local") and one for further-away. The further-away one would have to exclude players that were in other instances that overlapped your instance (so you would not hear from other players in a different instance at the same location, as that would break immersion).
There are lots of "edge cases" to be considered, and needs rules to prevent mis-use, but nothing that can't be solved. e.g. Once you have successfully located someone, but failed to reach them in time, you would not be allowed to locate them again for some time period. e.g. Maybe the time limit could be based upon distance, so the closer you get, the more time you are allowed, thus someone who Locates but does not actually fly towards them would get a much shorter time than someone who does.
But when Frontier have not even implement Local (instance) chat, these kind of discussions are probably pointless. First we need to convince them that a per-instance chat would make sense.