RESIDENTIAL RESEARCH

CITY CENTRAL EXAMINING ’S NEW PRIME RESIDENTIAL DISTRICTS FROM FARRINGDON TO WHITECHAPEL 2015

ESTABLISHED PRIME GROWTH AS A FUTURE RESIDENTIAL MARKET COMMERCIAL DISTRICT TRENDS KEY FINDINGS CITY CENTRAL LIVING The City and its surrounding areas are now firmly part of The areas surrounding the City are now established prime the prime central London residential market. Increased residential markets job creation, coupled with strong buyer demand, has underpinned price growth in the market. Property prices in these areas have outperformed average prime central London prices over A number of economic and cultural factors dimension to the area and helped attract have transformed the areas surrounding the thousands of young urban workers here. the last two years into some of the capital’s London tech firms, many of which are most active prime residential areas. based here, attracted a record $1 billion Global businesses have Growing demand from buyers is reflected of venture capital investment in the first announced plans to relocate their by rising transaction levels in the area which nine months of 2014, according to offices to the area were 19% higher in 2014 compared to London and Partners. 2012 and 42% higher than in 2011. Such is the area’s success, larger Over 15,000 new businesses Running from Farringdon in the west all the blue-chip companies are relocating, were set up in Tech City in way to Whitechapel in the east, as shown moving away from their previous haunts 2013/14, more than anywhere on page 3, the area benefits from existing in Soho and Fitzrovia, Covent Garden and else in the UK high quality property stock including the West End. All of this has served to Georgian terraces as well as period highlight the growing importance of the commercial buildings, some of which have area as a business hub. The arrival of in already lent themselves to conversion into 2018 will make Farringdon one Indeed, this growing tech sector and large-scale, open plan residential buildings of Britain’s busiest train stations, government initiatives to market the area not dissimilar to Tribeca in New York. linking , Crossrail and as a home for start-ups has prompted services The northern central quarter encompasses developers to tap into a need for supply , and and of new office and residential space, which we explore in more detail in this report. to the south it runs through the City of The area will be served by three London as far as Tower Bridge and the Crossrail stations, with extra outskirts of Midtown. The “Business” case station entrances at Barbican and Companies including Vodafone, Google, Moorgate, making this one of the The area boasts a wide cultural offering Amazon, Facebook, Intel, KPMG and best connected parts of London which includes Smithfield Market, Columbia McKinsey & Co have moved, or are Road Flower Market, Whitechapel Art planning to move to this area or its vicinity Gallery and Brick Lane. Proximity to these, with sites earmarked in Shoreditch, King’s as well as a host of other landmarks, has Cross, and Old Street among others. helped contribute to rising demand from buyers for property in the area.

Demand for housing is also spurred by the FIGURE 1 relative value on offer, in terms of price Outperforming prime central London per square foot compared to the more

traditional prime areas, as well as the 150 PCL ongoing regeneration and re-development 145 FARRINGDON OLD STREET taking place. In addition, the evolution 140 of new commercial districts has brought WHITECHAPEL 135 SHOREDITCH thousands of new workers to the area. 130 OLIVER KNIGHT Such change often brings with it the 125 Residential Research opportunity for price growth and, as our 120 research shows, the area has outperformed 115 “The areas surrounding the prime central London over the last three 110 City of London are some years (figure 1). 105 100 of the capital’s most active At the heart of all this is the business hub 95 prime residential areas, with Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 branded “Tech City”. This technology 2011 2012 2013 2014 transactions 42% higher in cluster, which is a hotbed for innovative

Source: Knight Frank Residential Research Demand2014 than from in Londoners2011.” fmar business start-ups, has added a further

2 FIGURE 2 Defining City Central Number of private residential units with planning permission or currently under construction

OLD STREET/ CITY ROAD

Private units: 2,116 FARRINGDON Angel Private units: 748 CITY ROAD SHOREDITCH Private units: 1,179 Old Street King’s Cross St Pancras COLUMBIA ROAD FLOWER MARKET SILICON ROUNDABOUT Shoreditch SHOREDITCH WHITECHAPEL High Street HOUSE Private units: 1,881 SPITALFIELDS MARKET Bethnal Green SMITHFIELD MARKET Moorgate CROSSRAIL Stepney Green CROSSRAIL Whitechapel BARBICAN CROSSRAIL Farringdon CENTRE Algate East Liverpool Street ST PAUL’S WHITECHAPEL CATHEDRAL BANK OF ART GALLERY ENGLAND THE GHERKIN MIDTOWN CITY OF LONDON Shadwell Private units: 681 TOWER OF ST KATHERINE LONDON DOCKS WAPPING

Waterloo Blackfriars Bridge Millennium Private units: 1,903 Bridge Bridge Tower SOUTHBANK Bridge Wapping

Source: Knight Frank Residential Research / Molior London

Some of these schemes may be phased, or construction not yet started, and take some years to deliver

Google’s new head office in King’s Cross 12% higher than in 2013 and over 50% is scheduled for completion in 2016 and higher than in 2012. will house 4,500 employees. This influx of Furthermore, research by Knight Frank has new workers is likely to boost demand for found that the time taken to let new and residential housing in the areas identified in FIGURE 3 refurbished office buildings in and around Hotbed of business creation this report. the City has fallen dramatically over the Number of new companies set up in 2013/14 Additionally, the presence of such last 24 months. Almost half of all schemes companies acts as a further boost for built in the last two years have achieved 18,000 employment and wealth creation, bringing 85% occupancy within 12 months of 16,000 thousands of new workers to the area and completion. This is a significant increase creating additional amenities in the form of from the preceding 2-year period, during 14,000 shops, bars, cafes and restaurants. which only 15% of schemes reached 85% 12,000 occupancy within 12 months. We expect that such “placemaking”, and 10,000 An active economy is driven by job the improvements to the public realm 8,000 which take place alongside this, will give creation and this is evident from the 6,000 buyers extra impetus to take an interest in results of a study by UHY Hacker Young

which found that 15,620 new companies Number of new businesses the area which could result in further price 4,000 were set up in Tech City in 2013/14 outperformance. 2,000 alone (figure 3). This is nearly five times Data shows that occupier demand for as many businesses launched as in the 0 Tech Borough, Canary office space in and around the City Canary Wharf area and more than double City Bankside Wharf & Bermondsey continues to grow. In 2014, some 9.2m the 5,850 new start-ups in the Borough, square foot of office space was leased, Bankside and Bermondsey areas. Source: UHY Hacker Young

3 31% 31% 29% 28% 29% 29% 28% 29% 25% 25%

18% CITY OF LONDON - 29% 18% - 28% HACKNEY - 31% TOWER HAMLETS - 29% CITY CENTRAL 2015 RESIDENTIAL RESEARCHCAMDEN - 25% UK - 18%

CITY OF LONDON In 2012/13,ISLINGTON HACKNEY 15,720TOWER HAMLETS new businessesCAMDEN UK were FIGURECITY OF ISLINGTON5 HACKNEY TOWER CAMDEN UK launched in Tech City. LONDON HAMLETS CROSSRAIL A growing workforce Forecast increase in jobs 2013 - 2031 Changes in infrastructure can The area’s long-standing association with stimulate and open up parts of a design, media and innovation acts as 31% city, attract investment and create a draw for start-ups, while the cheaper 29% 28% 29% additional demand for housing and office rents that are available make it a % 31% bring a new energy to areas. viable option for such25 firms. Commercial 29% 28% 29% rents here are around £50 per square The most significant such change 25% in London is the arrival of Crossrail foot compared to nearly £7018 in %Covent Garden and around £80 in Soho and in 2018. The high-speed rail line is the biggest infrastructure project Fitzrovia. In the West End office rents are in London in nearly two decades, more than double at £107.50. 18% and is set to increase London’s rail Our research has found that take-up transport capacity by 10% when of serviced office space, a popular it opens. This will be the single choice among smaller or relatively new largest uplift in capacity since the companies who are more reluctant to Second World War. sign for longer lease periods and Passenger numbers are expected appreciate the flexibility that serviced to be in the region of 200 million offices provide, has spiked in recent a year and the dramatically faster years in the central London areas. In travel times that will be possible CITY OF ISLINGTON HACKNEY TOWER CAMDEN UK 2014, take-up reached nearly 305,000 LONDON HAMLETS once Crossrail opens will make square foot, almost double the level central London more accessible to recorded in 2012 (figure 4). Source: Knight Frank Residential Research / Experian a greater number of workers, and to residents who will benefit from The city’s financial heritage has already support. For example, the government’s shorter journey times across the helped to foster a booming scene for UK Trade and Investment department capital and to airports. financial technology firms. A study by the consultancy Accenture found that has created the Tech City Investment The City and its surrounding areas London is the ‘fintech’ capital of Europe, Organisation (TCIO), the body responsible will be served by three Crossrail attracting around 50% of all European for making Tech City one of the world’s stations, at Farringdon, Liverpool venture capital funding over the last top destinations for tech entrepreneurs, Street and Whitechapel, with extra five years. rivalling world renowned locations such station entrances at Barbican and as Silicon Valley. Moorgate. According to Knight The drive to encourage companies within Frank’s recent survey of those As a result, Experian forecasts that the TMT sector to re-locate into this area renting property in London, nearly employment growth in the boroughs has been given the full backing of the UK 80% of Londoners said proximity will outpace the UK average over the government and is subject to a number to transport links was a key factor years to 2031 (figure 5), while their of initiatives aimed at providing financial when choosing where to live. average annual economic growth is forecast to outperform the rest of the UK We are forecasting that residential FIGURE 4 over the next decade. property located within a Entrepreneurial spirit 10-minute walk of Crossrail Take-up of serviced offices in the City and East Such growth is likely to act as a boost stations will outperform wider price 350 for the residential property markets growth in the area until the route 350 highlighted in this report. opens in 2018. 300 300 300 305 The arrival of Crossrail in 2018 is another , which will include 276 250 stations at Angel and and 250 250 key factor for these markets. The route runs through the heart of the area run north south through London, 200 200 200 with station entrances in Farringdon, will serve to further increase the (000’s sq ft) (000’s desirability of the City Road if final Barbican, Moorgate, Liverpool Street sq ft) (000’s 150 150 165 150 permission is granted. and Whitechapel. Crossrail has already 113 100 100 boosted the appeal of the area and our100 2014 Total take-up Total analysis shows that residential prices 76 2013 50 take-up Total 50 within a ten-minute walk of the station50 2012 entrances have already outperformed the 2011 0 0 2010 0 wider areas. This is expected to continue 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 in the run up to the line opening in 2018, Source: Knight Frank Research and beyond.

350 300 300 4 300 250 250 250 200 200 200 (000’s sq ft) (000’s 150 sq ft) (000’s 150 150 000’s sq ft 000’s 100 100 2014 2014 100 2014 2013 2013 Total take-up Total 50 take-up Total 50 2013 2012 2012 50 2012 2011 2011 2011 0 2010 0 2010 0 2010 CITY CENTRAL 2015 RESIDENTIAL RESEARCH

Farringdon In Old Street and along City Road, there are tapping into this need for high quality are currently more than 2,000 private residential housing like the Izaki Group Farringdon and nearby Clerkenwell have residential units with planning permission Long Street development of 119 units seen a noticable uptick in buyer activity in granted or currently under construction. which is due to be completed in 2017. recent years due to their proximity to the Some of these schemes are in the early Rising demand from buyers is likely to City and the South Bank and also as a stages of development and may take underpin pricing. Already property prices result of widespread regeneration and some years to deliver, but the scope in Shoreditch have outperformed the re-development. Over the last three of development planned highlights the wider market, rising by 46% over the last years, average property prices in benefits of this areas central location three years. Farringdon have risen by 45%. between the City and Islington. Crossrail will open its doors at Farringdon The level of residential development is Station in 2018. The arrival of the high- matched by commercial development City of London speed east-west train route will make activity with two major schemes close to The City is at the heart of arguably the Farringdon one of the biggest transport Silicon Roundabout – Derwent London’s world’s most important financial district, interchanges in the capital, linking White Collar Factory office building and and as such is always an attractive place Crossrail to Thameslink, a north to south Helical Bar’s The Bower – planned for to live for City workers. Another factor train line which calls at both Luton and 2016. Both will offer office space designed which has helped ease the City into Gatwick Airports. An estimated three to attract high quality tenants to the area. prime territory is the noticeable uplift in amenities for residents in recent years. million passengers are expected to use The step up in residential and commercial Farringdon’s Crossrail station every offering is having a knock-on impact on Demand for homes in the Square month. They will be transported to Bond retail. Take, for example, Whitecross Mile far exceeds supply – and recent Street in just four minutes, Canary Wharf Street, just off Old Street. This street has developments, including The Heron and in eight and will have direct access door undergone a complete transformation Roman House, have not dented the to door from Farringdon to Heathrow in over the last five years. It is now largely shortfall of properties. Developers just over 30 minutes. pedestrianized, and the retail offering continue to tap into the demand for includes art galleries as well as popular prime homes, as Barratt London’s plans A range of public realm improvements restaurants and independent cafes. for 165 apartments in its Sugar Quay are planned in the vicinity of the station Elsewhere, launched development demonstrate. and our analysis shows that there are Old Street station as its first innovative nearly 750 private residential units This type of re-development in the retail destination with seven new pop-up under construction or with full planning residential parts of the City has, over shops opening in the station foyer. So far permission in the area. time, resulted in a wider food and retail the available units have been occupied by, offering. This sea-change was cemented among others, Tate Modern, a seller Local demand for housing is evident – by the opening of One New Change back of electrically powered bicycles and a government figures show that forecast in 2010, the upmarket retail centre next to maker of marshmallows. household growth in Islington between St Paul’s, and the re-developed 2011 and 2021 is 18% – or an extra Cheapside, where an array of designer 16,500 households. Shoreditch / Hoxton shops are open seven days a week. Shoreditch has undergone a marked Old Street / City Road transformation over the last two decades. It is one of the most vibrant arts and The emergence of Tech City as a FIGURE 6 entertainment districts in London, making it burgeoning cluster of hi-tech and digital Economic growth companies based around Old Street one of the liveliest areas of London. 10 year average annual GVA growth roundabout has been a game-changer The area now attracts young professionals in terms of driving regeneration on City from all over the world. This trend is likely Road and Old Street. Average property to continue when new commercial tenants Tower Hamlets prices here have risen by 43% over the move in next door in Bishopsgate, bringing last three years. thousands of new workers to the area. City of London

The area’s proximity to the City, Down the road at Principal Place, for Islington Shoreditch and Farringdon (all less than a example, Amazon is due to open its 10 minute walk) has been recognised by offices in 2017, housing more than Camden major developers. Canaletto, a 31-storey 5,000 employees. water-side residential tower on City The forecast for household growth in Road, is one of the first of a cluster of Hackney Hackney between 2011 and 2021 is 13% skyscrapers to take shape. – an extra 13,000 households. Add the UK Across the road from the Canaletto cross-London appeal of the area to this tower is the site for Berkeley’s City local demand, and the indications are 0.0 1.0 2.0 3.0 4.0 5.0 Forum complex at 250 City Road, which that competition in this market could be % includes two towers. intense in the years to come. Developers Source: Knight Frank Residential Research / Experian

5 GLOBAL BRIEFING For the latest news, views and analysis on the world of prime property, visit KnightFrankblog.com/global-briefing

Whitechapel at the junction of Cambridge Heath Road. Expected to deliver approximately 650 Whitechapel is set to become a major new homes the scheme will provide a new RESIDENTIAL RESEARCH transport hub, connecting Crossrail to the ‘Whitechapel Square’ linking the Crossrail Oliver Knight orbital route around exit to Mile End Road. Residential Research London. Crossrail will also mean that +44 20 7861 5134 Whitechapel has a direct link to Heathrow, The complete overhaul of Whitechapel [email protected] with a journey time of just 36 minutes. In station, and the upgrade of the Royal London addition, the travel time to Canary Wharf Hospital, just opposite the station, which is LONDON RESIDENTIAL will be cut from 12 minutes on the overland due to be completed in 2016, will significantly Charlie Hart train and then , to just 4 minutes improve the public realm in and around the Residential Development City and East direct, enhancing the area’s attraction for station. There is a burgeoning cultural life in +44 20 7718 5222 workers based in Canary Wharf. the area, led by the Whitechapel Art Gallery [email protected] and the Royal London Museum. The Whitechapel Vision Masterplan, put Raul Cimesa together by Tower Hamlets Council, will There are a number of residential schemes Residential Development City and East, guide new development in the area over under construction or with planning New Homes the next 15 years. permission in Whitechapel amounting to +44 20 7718 5227 nearly 1,900 units which are due to be [email protected] The masterplan focuses on six key areas, completed in the coming years. including the revitalisation of Whitechapel Nick Parr Road and the creation of a new civic Average property prices in the area have Residential Development City and East, hub. It will also deliver over 3,500 new outperformed the average price uplift in Land homes by 2025, generate 5,000 jobs, the wider borough, climbing by more than +44 20 7718 5224 [email protected] and create seven new public squares 46% since 2011. This compares to price and open spaces. This includes the growth of 28% in Tower Hamlets over the redevelopment of the Sainsbury’s store same time.

OUTLOOK The areas surrounding the City of London Crossrail train from Moorgate, Front cover image: Crossrail/TfL are already residential and businesses hubs. Farringdon or Barbican, cutting travel Further improvements to infrastructure and times across the city and to major continued re-generation of the area will airports. result in new amenities being delivered, as There has also been much discussion Knight Frank Residential Research provides well as improvements to the public realm. about Crossrail 2, a second high- strategic advice, consultancy services and This is likely to increase buyer demand for speed rail line connecting South West forecasting to a wide range of clients worldwide residential property in the area and could London to the North East. One of including developers, investors, funding underpin future price rises. the key central stations for Crossrail organisations, corporate institutions and the public sector. All our clients recognise the need Transport is a key factor. It not only 2 will be Angel, at the other end of for expert independent advice customised to strengthens the attractiveness of the area City Road from Silicon Roundabout, their specific needs. for business, but any improvements are an adding to the transport links already in added benefit for those already living there. the area. At present, the areas discussed in this These infrastructure developments, report are well served by the tube and as well as the delivery of new homes overground network. From 2018 residents should serve to underpin demand in will be able to access the high-speed the residential sector.

© Knight Frank LLP 2015 This report is published for general information only and not to be relied upon in any way. Although RECENT MARKET-LEADING RESEARCH PUBLICATIONS high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility RESIDENTIAL RESEARCH or liability whatsoever can be accepted by Knight Frank LLP for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in TECH CITY part is not allowed without prior written approval LIVING RESIDENTIAL DEVELOPMENT AREA FOCUS 2013 of Knight Frank LLP to the form and content

HOUSING DEMAND CHANGING RESIDENTIAL SECTOR OUTLOOK within which it appears. Knight Frank LLP is a The Wealth Report Midtown 2014 Tech City Living – Eastern Opportunity limited liability partnership registered in England 2014 2013 2014 with registered number OC305934. Our registered office is 55 Baker Street, London, W1U 8AN, where Knight Frank Research Reports are available at KnightFrank.com/Research you may look at a list of members’ names.