London Update

February 2008

Young Group at MIPIM 2008
Generating Regeneration
Regeneration News
Economic and Market News
Latest Young Group News
About Young Group

Generating Regeneration – Paula Hawkins

The decline of the UK’s industrial and manufacturing economy has thrown up difficult challenges for urban planners, notably how to deal with city centres blighted by unemployment, poor housing and huge, post-industrial brownfield sites in need of redevelopment. The solution to these problems comes in various forms of urban regeneration: the attempt to improve the physical, social and environmental infrastructure of these areas.

Regeneration & Renewal, a magazine for professionals working in the sector, has drawn up a list of the UK’s 100 most valuable regeneration schemes as of 2007: together the total value of those projects is £36 billion; it encompasses projects across the country, from the £5.46 billion Edinburgh Waterfront redevelopment in Leith to the £38 million Gardiners Lane scheme in Basildon.

Who drives regeneration?
The initiative for regeneration often comes from government, be it central or local, and in many cases, a significant proportion of the funds for these schemes comes from the taxpayer. But private sector involvement is crucial, and has been encouraged by various governments over the past 30 years through a variety of schemes offering tax breaks and other incentives.

In the early 1980s, for example, the Thatcher government came up with Enterprise Zones, designated areas in which developers could build without paying development land tax or paying industrial and commercial property rates. London Docklands was one of the first Enterprise Zones. The current government also offers tax breaks for urban regeneration companies operating within certain areas, as well as offering smaller concessions, such as the higher minimum stamp duty threshold – of £150,000 rather than £125,000, if you purchase property or land in ‘disadvantaged areas’.

In some cases, regeneration is primarily driven by the private sector. Over the past 15 years, Forth Ports, which operates seven ports in Scotland and England, has invested more than £100 million in developments which kick-started the regeneration of the Leith district.

Smaller-scale regeneration projects are often driven by local communities and can have a rapid impact on local communities. The regeneration of the Market Estate in North London is a case in point. After a series of incidents on the estate, residents formed the Market Estate Tenants and Residents Association to press for change, and Islington Council was persuaded to bring in a new housing association and contractor to redevelop the area. Three years into the project, 140 new homes have been built, and new green spaces and play areas created. Crime on the estate is reported to have fallen, while employment is up.

Most regeneration projects require some sort of public-private partnership and in some cases a huge number of different agencies can be involved in order to kick start the process and ensure that the regeneration activity delivers the right results. In the Thames Gateway for instance – which is one of the largest regeneration projects ever undertaken in the UK – dozens of private companies are working with 17 local authorities, two county councils, three regional assemblies, three regional development agencies and a number of different government departments.

Why regenerate?
The Thames Gateway project, which involves the regeneration of a number of towns in an area stretching from Newham and Greenwich in east London to the Isle of Sheppey in Kent and Southend in Essex, is essentially driven by the need for new housing in the south east. Described as “London’s safety valve”, the area is to be the setting for more than 120,000 new homes to be built over the next decade. While the need to build houses and to create jobs is almost always the general rationale behind regeneration, in some cases, there can also be a more specific driver. Liverpool’s nomination as European Capital of Culture was the spur for a number of regeneration schemes, just as London’s successful bid to host the 2012 Olympics is helping transform the eastern part of the capital.

How regeneration works
The Olympics have been the spur for a number of regeneration schemes in east London, but perhaps their most important legacy will be the improvement of transport infrastructure in that part of the city, since without the right transport links, an area cannot really thrive. Hackney is a good example: for many years, parts of Hackney have been going through a gradual process of redevelopment and improvement. There had for many years been talk of an extension to the east London line which would finally put the area on the tube map. However, it was not until London won its bid for 2012 that the arrival of new underground stations, which will open at Haggerston and Dalston in 2010, became a certainty. At the same time, the completion of the massive regeneration scheme at Kings Cross, along with the arrival of the new Eurostar terminal at St Pancras International, has meant that Hackney’s residents are now only a little over 2 hours and 15 minutes from Paris.

The transport improvements have heralded a new phase in Hackney’s progress: house prices have outpaced the London average, a Tesco has opened on Kingsland High Street, the London Fields Lido has re-opened, 4,500 new homes are to be built as part of a £1 billion scheme at Woodberry Down.

From regeneration to gentrification
The prospect of an improvement in transport links, or of the creation of new jobs, are two of the key indicators that investors and developers look for when scouting for the next property hotspot. So too is an increase in the number of start-up businesses or creative industries in an area. These are often the first arrivals to a regenerating part of a city, attracted by cheap rents and attractive work spaces: lofts, warehouses and other ex-industrial buildings.

Buy-to-let investors are always keen to get into regenerating areas as early as possible in order to maximise the potential for capital gains, although they will usually have to take a medium to long-term view. Particularly in the case of larger projects, it may be several years before an area is seen as desirable, or before a true feeling of community develops.

The arrival of certain high street names tends to put the seal on an area’s rehabilitation. When your local Sommerfield supermarket is replaced by a Sainsbury’s, you know things are looking up, but the arrival of Waitrose is really worth getting excited about. According to Knight Frank, the estate agency, the opening of a Waitrose in Wapping meant landlords could up their rents by £25 a week straight away and instantly opened up the local lettings market to corporate tenants. The arrival of Starbucks on the high street may sound the death knell for your quaint local coffee house, but it will do wonders for your house price.

Written by Paula Hawkins – Paula writes on the residential property market for a range of national newspapers including The Times, The Independent, The Sunday Telegraph and the Evening Standard. Paula has also written a guide to personal finance, published by Penguin Books.

REGENERATION NEWS

The Changing Face of London

New London Architecture (NLA) is exhibiting a 1:1500 scale model of Central London, showing the city’s future structure. Stretching from Paddington to the Royal Docks and from Kings Cross to Elephant and Castle, the ‘Pipers Model’ highlights new building and infrastructure projects (including The Landmark in Canary Wharf) coming to the Capital to meet the demands of growth. The exhibition is open 6 days a week at The Building Centre in Central London (www.newlondonarchitecture.org).

The Pipers Model of London at the NLA Exhibition

Barratt gets go-ahead for Canada Water Scheme

Barratt Homes has been given planning permission to develop the first residential phase at British Land and Canada Quays' £1.5bn Canada Water regeneration. Southwark Council has given permission for initial homes on the 40-acre site, with a third to be allocated as affordable housing. The masterplan for the area includes 2,800 homes, an £8.5m library, 100,000 sq ft of offices and live-work space, 100,000 sq ft of shops and cafes, leisure facilities, and new public spaces located around the Canada Water dock.

Canada Water clearly remains a focus for investment and will continue to benefit from the regeneration coming to the area; something that Young Group pinpointed early on when we offered clients investment properties in The Water Gardens, which is due to complete within the next few weeks.

SE1 Regeneration Races Ahead

As Young Group’s MyBASE1 development in Southwark fast approaches completion, this month saw the borough council approve Wilkinson Eyres Architect-designed plans for a site at the junction of Blackfriars Road, Stamford Street and Paris Gardens. The new 450,000 sq ft mixed use scheme includes a 42-storey residential tower and a 23–storey, 277,380 sq ft office block. The 250,000 sq ft residential tower will consist of 286 flats. The scheme also includes a seven storey residential building and a four storey office block as well as 13,000 sq ft of shops, new open spaces and 82 underground car parking spaces. As part of the section 106 agreement, the developer will contribute £5.9m towards local community regeneration.

In addition, the Founders Place key worker housing development, near London’s Waterloo, has finally been put out to tender following last year’s bitterly contested battle to gain planning permission for the scheme. The £300m Guy's and St Thomas' Charity-led landmark mixed-use project, designed by Sir Terry Farrell, will include 300 private flats, 400 key worker homes, a health facility, a patient hotel and 45 low-cost flats on a 2.9-acre site opposite St Thomas’ hospital, on Lambeth Palace Road, SE1.

2012 Olympic Park

The London Development Agency (LDA) has selected San Francisco-based architect EDAW and Dutch practice KCAP to masterplan the redevelopment of the 500-acre Olympic Park after the 2012 Games. The firms’ masterplan will form the basis of plans to be submitted in 2009 that will focus on the long-term use of the five permanent Olympic venues post-Games plus the delivery of major development in Stratford and the Lower Lea Valley which will include 30,000 homes.

The London Development Agency has Selected Legacy Masterplanners

Barracks in Record Sale

The sale of the historic Chelsea Barracks has completed for £959 million; the UK's most expensive residential property deal ever. The 12.8-acre site has been bought by the Qatari government and the Candy brothers. It will be cleared to make way for 2,000 new luxury homes.

ECONOMIC & MARKET NEWS

Base Rate Down by 25 Basis Points

The monetary policy committee last week dropped the base rate to 5.25%. The fall is a steadying hand that further stabilises the economy, the broad economic indicators of which remain robust.

London Leads Property Market

Average property prices in London increased by 1.1 per cent during January, the largest increase since September’s credit crunch (source: Knight Frank). It is the forth consecutive month in which there have been signs of modest growth and as a result annual house price growth stands at 26.2 per cent.

London is outperforming the rest of the UK and indicators suggest this will remain the case. With a population of 7.2 million, London is the largest city in Europe, estimated to expand to over 8 million by 2020 (Source: ONS, GLA). The Capital stands out from other parts of the UK in several respects. It has by far the highest population density and compared with those living in other regions, London’s residents are more likely to be living alone, privately renting their accommodation and working within service industries.

Slowdown, Not Withdrawal

According to Savills’ latest buy-to-let survey there will not be a significant withdrawal from the sector due to the fact that the majority of owners view their investment as long-term, with 55% of owners looking to retain their portfolio for at least 10 years. The survey of 400 investors found that two thirds were looking to increase the size of their portfolio and supports the latest Young Index results.

UK Housing Review

The 2007/8 UK Housing Review has been published by the Building Societies Association and Chartered Institute of Housing. The review points out that the private rented sector has grown by 21% across the UK over the last five years and is now fulfilling a major role in the housing market. Affordability is a major influencing factor in driving the rental sector and tenants now pay almost a third less than the mortgage repayments on the same property, highlighting the problems that first-time buyers have in getting onto the housing ladder. Estimates from the Government show that 43 per cent of households under-30 renting, compared to just 33 per cent in 2001. This month, the government launched its own independent review of the private rented sector, estimating that almost 2.5 million homes in England being rented from more than half a million private landlords.

Coming to Canary Wharf

Moody’s Investors Service, the rating agency has announced that it is to take 170,000 sq ft on floors 11-16 at One Canada Square. Moody’s will be relocating from various buildings in the City of London and consolidating its London staff in the Docklands’ landmark building. Canary Wharf has also let new space to Abbey Business Centres and the Financial Services Authority, totalling another 55,000 square feet.

Also this week, GE Money announced plans to relocate the headquarters of its core consumer finance division from Connecticut to London in a move symbolising a shift in the US conglomerate’s centre of gravity. With $200 billion of assets, GE Money is the world’s largest provider of private-label credit cards, with revenues of £13 billion per year.

BA’s Business-Only City to NYC

British Airways has announced plans to launch the first ever transatlantic flights from London City Airport. The twice daily service will use Airbus A318s, equipped with just 32 seats which convert into fully flat business class beds and allow check-in up to 15 minutes before departure. BA has not yet announced which airport it will use in New York. JFK seems the obvious choice, but is constrained by capacity.

New Life to The O2

The transformation of the blighted Millennium Dome into the 02 Arena has been hailed a triumph. Over the last year, the East London venue has sold more concert tickets than any other venue in the world, around 1.4 million, despite only opening in late June 2007.

The Millennium Dome has a New Lease of Life as the 02

London Top for Law Firms

London accounted for nearly half of the total office space let to law firms in Europe's top 16 legal centres in 2007, according to the latest EMEA Legal Services Business Briefing published by Cushman & Wakefield. London has emerged as a global gateway for the legal sector, home to Europe's top four law firms, all of which have expanded dramatically over recent years. The Capital’s success as a legal centre is attributed in part to the phenomenal growth of London's capital markets over recent years.

London is World's Top Place to Visit

London has been voted the greatest holiday destination in the world in an international poll carried out for The World Travel Awards, beating competition from cities such as New York and Sydney and idyllic beachside retreats including Barbados and the Maldives.

LATEST YOUNG GROUP NEWS

Young Property Talks Development Fund

Since the beginning of February, Young Property (the development arm of Young Group, headed by Iain Macgregor) has begun the process of talking to premier clients who had expressed an interest in the Young London Development Fund.

Due to Financial Services Authority (FSA) regulations, we’re limited in the information that we can report, but Young Group’s portfolio managers are on hand to speak to clients on an individual basis regarding the fund’s progress and are making contact with all those who have expressed an interest in knowing more about the structure and details of the fund.

A Workplace Invitation

During the last 12 months we successfully hosted a number of lunchtime and after work gatherings at selected clients’ places of work. Typically held for an hour, and limited to between five and ten participants, the gatherings offer the opportunity for clients and their colleagues to learn more about our Property Portfolio Management service.  We discuss London’s property market, sharing our analytical view of the current situation and longer term outlook, alongside the areas that we believe offer the best investment opportunities.

Previous events have proved hugely popular and we’re currently putting together the programme for 2008, which will see us visiting a number of law and accountancy firms, investment banks and headhunting companies, both in London and major cities overseas.

If you would like to arrange for us to host an informal lunchtime or evening gathering at your workplace, we’d be delighted to discuss it with you. Feel free to contact us on +44 (0)845 356 1000 or email dmackenzie@younggroup.co.uk.

MyBASE1 Lettings Underway

With the phased completion of MyBASE1 in Southwark fast approaching, Young Lettings has begun marketing apartments to prospective tenants. In order to secure as many tenancies as possible in advance of completion, Young Group has worked with the developer to arrange for an apartment to be completed and furnished ahead of the rest of the development.

Access to this apartment is being coordinated with the developer (working around the ongoing restrictions associated with a live building site) to enable prospective tenants to see the quality of a typical apartment and the furnishings that will be provided, ahead of completion.

Landmark Design

Although still 2 years from completion, Young Group has commissioned nationally acclaimed architect and design consultants Blustin Heath Design to design the kitchens and bathrooms at The Landmark. Nicki Blustin and well known face of design, Oliver Heath, have a reputation for delivering bespoke solutions that are practical, elegant and ecologically considerate. Neil Young, CEO of Young Group commented, “The Landmark is an iconic development in the heart of London’s world-class financial centre. Our design consultants will ensure the interior finish reflects The Landmark’s striking exterior and commanding location.”

About Young Group

Young Group specialises in providing Property Portfolio Management services to private investors; offering the best off-plan direct investment opportunities in London, as well as access to indirect, development fund investment opportunities through its development arm, Young Property. Young Group manages the entire investment process. For direct investments this spans from sourcing the opportunities through to financing, furnishing and letting.

Young Group owns all the property that it sells, and also retains a number of units in each development for its own portfolio. As the principal in every transaction, Young Group does not realise any profits until completion and has transacted in excess of 1,700 apartments, with a retail value of £630 million. The Group’s lettings division, Young Lettings, has successfully let the majority of investors’ apartments within a week of completion.

Young Group supports NORWOOD and CHILDREN with LEUKAEMIA, two charities particularly close to our heart, donating £50 per property exchange.

t:  +44 (0)845 356 1000   e: info@younggroup.co.uk