London Update
Issue 42
Feature Article: Weaving Crossrail's Magic into London's Rich Tapestry
Economic and Market Roundup
Regeneration News
Young Index, Q2 2009 Results
About Young Group
Feature Article: Weaving Crossrail's Magic into London's Rich Tapestry
Daniel Moylan
Deputy Chairman, Transport for London
As the Mayor pressed the button on 15 May to launch the first pile into North Quay dock at Canary Wharf, many Crossrail supporters, among them the capital's business leaders, celebrated that this much heralded project is now finally underway.
For some the focus of this mammoth scheme will now understandably be below ground - the engineers rising to the challenge of carving two large tunnels beneath the footprint of central London and the creation and training of the skilled workforce who will undertake this task. The prize is joining the mainline railways east and west of the capital to provide new, modern, high-frequency, high-capacity services, relieving overcrowded Tube and rail services, and supporting London's long-term success.
Crosslink route map
What must not be forgotten, however, is what happens above ground - the huge opportunities that Crossrail provides to unlock long-term improvements to the urban environment and to regenerate and grow the economy of key areas of our city. This is not just looking at the stations and buildings above them, but also the vital spaces between them, which I believe has still to be better understood and managed - the public realm.
Such considerations are more acute as we address the carbon and sustainability challenges with which all urban areas must contend. We will inevitably have to increase the density of our cities - Crossrail underpins a denser London given the quantum shift in the transport carrying capacity it provides - which leads to how we craft, use and share space.
Let us take the West End, Europe's largest retail centre with a global recognition and brand, vital to the London and UK economy.
Crossrail will, in effect, create two gateways into and out of the West End business and retail districts, one at Tottenham Court Road and one at Bond Street. The stations will cater for many more passengers, which are already increasing year-by-year, with better interchange, passenger movement and step free access. The ticket hall at the current Tottenham Court Road station will be nearly six times the size of the current one.
CGI of Bond Street ticket office
Looking out from the stations, there will be four new entrances to the south of Oxford Street, at Davies Street, Hanover Square, Dean Street and Centre Point. Public realm opportunities exist around each of these. There are considerations about wayfinding and how the street environment relates to the new entrances, which will almost certainly become landmarks in their own right as many Tube stations are today.
The over-site development above the rebuilt stations will require careful attention, including the context in which they sit and also the further development that Crossrail spurs or is already underway, such as is the case with the Central St Giles development at Tottenham Court Road.
Both boroughs, Westminster and Camden, are working closely with Transport for London (TfL) and business organisations, including the Business Improvement District, the New West End Company (NWEC), to look at integrating the space between the stations.
Works are already underway at Oxford Circus to improve the pedestrian movement at this busiest of intersections as part of the programme, which provides improvements to the major retail streets of Oxford Street, Regents Street and Bond Street (the ORB programme). And at the area east and north around Tottenham Court Road station, the London Borough of Camden is looking at schemes to improve traffic flows and road layouts, which in turn offers opportunities such as wider pavements, lighting, tree planting, reduced street clutter and cycling enhancements. This programme would connect with the new piazza created outside Centre Point and remodelled road layout as part of the Crossrail and Tube rebuilding programme.
The point of outlining this is to show that large public transport infrastructure can no longer be planned in isolation from its setting and the developments which will take place around and above it.
Work has started along the Crossrail route to ensure that the public realm designs take into account the existing context and how the area will change in the future. For example, at Farringdon the special historic built environment which needs to be sensitively handled also has the capacity for redevelopment, especially as it represents the crossover point between Crossrail and Thameslink; two massive transport investments totalling over £20bn.
The stations at Paddington, Whitechapel and Custom House are three other locations with significant opportunities.
The Crossrail Act, which governs the building of the Crossrail programme, puts in place requirements which seek to ensure that the over-site developments are successfully realised. The requirement that planning applications for the over-site developments are submitted within two years of Crossrail construction starting means that these buildings are designed side-by-side with the stations and urban realm.
Close working with boroughs, other public sector partners and over station developers is essential if Mayoral and borough aspirations are to be met, and the return on the huge Crossrail investment is to be maximised.
Canary Wharf station cross section
It will be a challenge for all parties: for Crossrail Ltd, TfL and Network Rail the main bodies involved in delivering the scheme; for boroughs to take up the opportunities to exploit this huge investment; and to business, in particular the regeneration and property development industry. As well as thinking about the 'inside' of a building, it has to be recognised that the contribution to the success of the project also relies upon its relationship with the external environment and the 'threshold' over which the public will arrive.
We are in partly uncharted territory given Crossrail is a scheme of a size and scale not seen for decades, but there are useful examples on which to draw.
The architecture of the Jubilee Line Extension is greatly admired and there are some high quality public spaces including Canary Wharf and some well designed public transport interchanges such as at Canada Water. But there are also some missed opportunities - over station developments have never happened at Bermondsey and Southwark stations and are examples of where delivery stopped at the station entrance.
There are also a number of schemes which were once thought of as challenging and controversial, and are now helping to define a vision for the public realm. Two major central London projects come to mind - the transformation of Kensington High Street, in my borough, is one, and the pedestrianisation of the Trafalgar Square another.
Smaller scale schemes such as the shared surface outside the Tube station at Sloane Square, the public seating and water feature created in the Old Bailey in the city and in the colonisation of the street edges by cafes and restaurants in St Christopher's Place in the West End also provide both insight into the benefits of such interventions as well as some of the guiding principles about how we approach the space between buildings.
Exhibition Road, currently being transformed, will also be a guide, as could the evolving scheme for Chancery Lane which is being developing by the City of London Corporation and Westminster and Camden Councils with the private sector.
There are constraints of course - Crossrail has to meet safety and security requirements and designs will need to cater for the significant flows of passengers and respond to other public transport links, cycling and walking. Funding is also by no means limitless.
Crossrail Ltd, now a subsidiary of TfL, is working closely with other parts of the TfL family, with developers, the boroughs, the Greater London Authority (GLA), the LDA and English Heritage to tackle these issues; and in outer London with Network Rail on design and interchange at key locations where existing stations will be significantly reconstructed including Ilford, Abbey Wood and Ealing Broadway.
Crossrail is also seeking advice from a Commission for Architecture and the Built Environment (CABE) Panel which is offering constructive advice on the designs at an early stage. The project can therefore benefit from leading national experts on architecture, engineering and the urban realm.
The development of our city has taken place over centuries, a proverbial patchwork quilt, albeit with threads running throughout. Crossrail is an opportunity to remake part of the quilt through a broad partnership, enabling future generations to not only experience a modern new railway, but also a much improved environment when they step out from the stations.
Daniel Moylen
Deputy Chairman - Transport for London
Bank of England Base Rate: Steady as She Goes
As widely expected, the Monetary Policy Committee voted once again to hold the base rate at the current level of 0.5%.
Economy Contracts at Faster Pace Than Predicted
In the year to Q1 2009, the economy shrank by 4.9% according to latest figures from the Office for National Statistics; the fastest rate since 1931. The drop in GDP during Q1 itself was 2.4% against expectations of 1.9%.
Britain Still First for Foreign Investment
The department of UK Trade and Investment has revealed that the UK still attracts more overseas inward investment than any other country in Europe and globally is second only to the USA. In the year to April 2009, more than 1,700 foreign-funded projects located or expanded in the UK, up 11% on the previous year.
Overseas Investment Targets London Commercial Property
Data from Cushman & Wakefield shows that investment in commercial property in London has risen for the first time in two years. Investment purchases made in London's West End, City and Docklands office markets during Q2 2009 totalled £1.43billion, up 110% on Q1, buoyed by interest from French, German and Italian investors.
Property Funds Show Investment Inflow
The tide has turned in property fund investments. May saw the first monthly net inflow of investment since April 2008, at £36million. Meanwhile, BDO Stoy Hayward reports investor returns for commercial property have improved from minus 5.27% in January to minus 0.9%, the highest level for more than a year.
Listed Property Posts Positive Perspective
Reita, the industry body for listed property companies, has said that 90% of respondents to its 'Property Investment Perspective' survey report an increase in positive sentiment during the last 3 months; sentiment echoed in the residential investment sector by Young Group's latest Young Index results (see below for full results and analysis).
Residential Repossession Rates Falling
The Council of Mortgage Lenders (CML) has revised downwards its repossession expectations for 2009 from 75,000 to 65,000 in reflection of "lower interest rates, government intervention and lenders' forbearance" as the Financial Services Authority (FSA) reported that the number of mortgages slipping into arrears during the first three months of the year fell by 12% from the previous quarter.
Volume of Mortgage Approvals Climb
The British Bankers Association (BBA) has indicated that mortgage approvals for May climbed by 2% from April to 75,218 loans. However, this remains 36% lower than a year ago. The number of loans for new home purchases was 31,000 - the highest level for a year. However, the value of gross mortgage lending in May remained 51% lower than 12 months ago, standing at £7.7billion. The CML arrived at similar results, reporting that gross lending for May dropped by 2% from April and remains 58% lower than for May 2008.
A Record £8.1billion Paid-off Mortgages
According to the Bank of England, UK homeowners paid a record £8.1billion off their mortgages during the first quarter of 2009 as they took advantage of the historically low base rate to pay down more mortgage debt than ever before.
Buy-to-Let Purchase Loans Outweigh Remortgages
According to Mortgages for Business, purchase transactions accounted for 65% of brokers' loans in June indicating that investors are taking advantage of current market conditions to add to their portfolios.
Construction Fears Heighten
The building sector is facing its sharpest fall on record, with a fifth of the industry disappearing over the next two years, according to the Construction Products Association. The trade body expects the sector to decline by 16% this year and by another 5% in 2010, confirming the predicted shortfall in targets for new homes.
Change of Fortune for Landlords
The Royal Institution of Chartered Surveyors (RICS) expects landlords to be on the right side of the bargaining table in coming months as the ready supply of rental property is likely to contract. RICS spokesman Jeremy Leaf explained, “In the coming months, those renting out their homes opt to put them back on the sales market. Property transactions are starting to rise from very low levels and the influx of supply in the rental market has slowed as vendors begin to find buyers.” FindaProperty.com reported that the tide is turning with average rents across the whole of the UK rising by 0.5% during the month of June, citing that the oversupply of rental properties is no longer as dramatic as it was earlier in the year.
MPs Heading for Rented Accommodation?
The Committee on Standards in Public Life is reported to be evaluating a new model of accommodation for MPs whereby the House of Commons would rent properties and make them available directly to MPs during their time in office. Rent would be paid by the House to the landlord, cutting MPs out of the financial transaction.
House Prices Hold Firm
For the third time in four months, UK average house prices have risen. June saw a 0.9% rise over the previous month according to the Nationwide House Price Index and although the annual movement is a fall of 9.3%, this is the first positive quarter on quarter change since December 2007. However, concerns have been voiced in the press that the current rallying of property prices is due to the very low volume of property currently on the market. Standard and Poor's expects prices to stabilise in the forth quarter of 2009 (at 7% lower than December 2008), much faster than for the rest of Europe where recovery is not expected before 2011.
Government Bonds Mooted to Finance Regeneration
The Government is rumoured to be in talks with property developers about introducing local authority-backed bonds to finance regeneration projects that have stalled. It is expected that the plans will be outlined in the Pre-Budget Report. The British Property Federation has recently pointed out that sites could remain mothballed for years to come unless alternative sources of funding are found.
Wapping Waterfront Development
Private investor Nick Capstick-Dale plans to turn a former 143,000 sq ft warehouse at Metropolitan Wharf in Wapping, E1 into a destination building with riverside restaurant, bar, New York deli, offices and apartments. It is thought that initial plans will include luxurious penthouse apartments with river views.
Metrolpolitan Wharf
Long Term Plans to Shape Earls Court
Regeneration of 70 acres around Earls Court will be driven by a special purpose vehicle formed of the area's landowners, led by Hammersmith & Fulham Council. It is thought that Earls Court's exhibition centre will close following the 2012 Olympic Games and a masterplan for 15million sq ft of development around the centre is being drawn up. It would see a new £400million international convention centre, offices, shops and thousands of new homes.
Earls Court at night
Islington's City Forum Takes Another Step Forward
Islington Council has resolved to grant planning consent for the 1.1million sq ft City Forum scheme on the border of City Road and Dingley Road, N1. The current site of 1980s offices will be transformed to provide 720 new homes, offices, shops, restaurants, a hotel and student accommodation, all centred on a new central public piazza.
Thames Barrier to be Joined by Homes
CGI of Barrier Park
Newham Council has approved plans for 750 new homes, commercial space and open public areas at a former industrial site adjacent to the Thames Barrier in East London. Construction at the Barrier Park East site will begin before the end of the year and complete in 2015.
Buy-to-Let Investment on The Rise Once More
Results from the Q2 2009 survey of investor market sentiment show that increasing numbers of residential property investors are considering purchasing additional UK properties within the next 12 months. London remains the preferred location for investors; 52% are considering buying additional property in the capital – an increase of 12% on the previous quarter (although still 8% down on Q2 2008). The trend is not only confined to London, with 30% of investors considering adding UK assets outside of the capital to their portfolios – compared to 24% in the Q1 this year.
57% of investors believe that London prices will be at current levels or higher by this time next year (an increase from 49% in the previous quarter and up from a low of 36% in Q4 2008) and 42% expect the same to be true of UK property outside London (up from 24% in Q1 2009).
Young Group recognises the importance of tracking medium and long term trends and this is the second quarter in which we've witnessed an increasingly positive sentiment from the Young Index data. The trend continues to move in an upward direction and demonstrates a positivity and willingness of private investors to increase their holdings of residential property. It remains to be seen if this burgeoning demand will translate into purchases or whether the languishing mortgage market kills the prospect of a relatively smooth return to house price stability and growth.
The private rented sector plays a valuable role in providing housing, demonstrated by the Government's commitment to boosting the sector through the Homes and Communities Agency's (HCA) Private Sector Rental Initiative (PSRI), but the sector is suffering because private investors still find it difficult to secure appropriate mortgage products.
Investors, “Don't Take Your Eye off The Ball”
Fewer than 1 in 4 residential property investors are tracking their mortgage options on a 6 month basis according to Young Group's latest Young Index survey, and 32% admit to evaluating their mortgages less than once a year. Neil Young, Young Group's CEO points out, “With the base rate at such a low level, investors have stopped reviewing their mortgage options as regularly.”
There may be a general assumption that with base rate currently at an all time low, dropping onto a lender's Standard Variable Rate at the end of a deal is the best option, but this may not automatically be the case.
Neil Young concludes, “Just because there are fewer mortgage products available, investors shouldn't take their eye off the ball. Now is the time to be paying more attention to the mortgage market to avoid the risk of losing out when base rate inevitably rises in the future. Rates for new mortgage products can change rapidly and to make the best of their own specific circumstances borrowers need to keep on top of the market: The deals with the most attractive rates and criteria are often fully subscribed within just a few days of being released.”
Young Index Q2 2009 - Summary of Results
24% of investors review their mortgage options at least every 6 months (down from 82% in Q2 2008). 32% of investors now evaluate their mortgages less frequently than once a year.
99% of investors intend to hold their residential property investments for the next 12 months. 41% intend to hold their assets for at least 10 years and 12% of private residential property investors intend to retain their property investments for the next 20 years or more.
On average, residential property investors expect to hold their investment assets for the next 10 years.
52% of investors are considering purchasing additional residential property assets within London during the next 12 months, compared to 30% who are looking at opportunities in the UK outside of the capital.
The outlook for London property prices is more than twice as strong as for the rest of the UK. 57% of investors believe that London prices will be at current levels or higher by this time next year (up from a low of 36% in Q4 2008) and 42% expect the same to be true of UK property outside London.
84% of respondents expect the Bank of England base rate to have risen by this time next year, but expect it to remain below 1.5%. The average interest rate outlook for the next 12 months is 1.19%.
More than 3 in 4 respondents expect to witness a return to economic growth by June 2010, with the majority anticipating positive growth as early as Q1 next year
...And We Have A Winner!
Everyone who provided contact details when completing the latest Young Index poll had the chance to win £100 of John Lewis vouchers - our way of saying a small 'thank you' for taking part. This quarter's lucky winner was Melanie Phillips. Congratulations!
London Update Feedback and Comments
We'd very much like to hear your views and feedback regarding our monthly London Update newsletter. If you have any comments or suggestions for future themes, please feel free to email moakes@younggroup.co.uk. If would like to respond to any of the items, your comments could be featured in a future issue.
THE LANDMARK - MORTGAGES
The developer has indicated that phased completion at The Landmark is on track to commence at the end of this year. Investors who have purchased property in The Landmark's West Tower should now begin exploring their mortgage options. Contact Young Finance on +44 (0)845 356 1000 and speak to Jane Reeves.
Young Group specialises in delivering Property Portfolio Management services to private and institutional investors. The Group’s activity spans the entire investment cycle from identifying opportunities and financing their acquisition, through to managing the asset (furnishing through Young Furnishing; tenanting through Young London; financing/refinancing through Young Finance), regularly reviewing the performance of the property holdings and advising on strategic direction, through to realising returns in the most tax efficient manner. Young Group supports NORWOOD and CHILDREN with LEUKAEMIA, charities doing valuable work which is particularly close to our hearts.
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