RESIDENTIAL RESEARCH

EASTERN PRIME AND ITS ENVIRONS 2015

ECONOMIC HOUSING SUPPLY THE CHANGING FACE FUNDAMENTALS AND DEMAND OF CANARY WHARF A PRIME RESIDENTIAL DISTRICT The growth of Canary Wharf to become one of Europe’s largest financial services employment clusters in the last 20 years has overshadowed its emergence as a leading prime residential market. The next wave of development is likely to rebalance this view, supported by new infrastructure and amenities, which will reinforce the area’s position as a prime residential address.

Canary Wharf is best known as one of amenities. The Canary Wharf Estate is Europe’s leading financial and business home to one of the busiest and most employment clusters which, alongside the vibrant shopping malls in the city. In total, City of London, form one of the world’s there are more than 300 shops, cafés, most important financial districts. supermarkets, bars and restaurants on the 89% Estate, open seven days a week, making It is home to the headquarters of major Population increase in banks, media companies and professional it an attractive residential environment as Canary Wharf and its services firms including Citigroup, JP well as a business centre. immediate surrounds Morgan, Credit Suisse, Thomson Reuters As one of the limited number of areas in between 2001 and 2011 and KPMG. London’s zone 1 and 2 where there is the It also sits within one of the fastest potential for large-scale redevelopment, growing areas of London. The population the Canary Wharf estate is now poised to of Canary Wharf and the area to its south further expand as residential district. in the rose by 89% between The development planned for this area, 2001 and 2011. including a school, will augment its appeal This growing population has been to a wider demographic, attracting families accompanied by an expansion of as well as young professionals, and serve

MARKET ANALYSIS Property prices in Canary Wharf more established prime residential have risen by 27% since early 2013, neighbourhoods in West London. outstripping the 10% growth seen across prime central London over the same time, FIGURE 1 according to Knight Frank’s index. Price outperformance in Canary Wharf Indexed to 100 = June 2012 Such strong growth is partly underpinned by the improving UK economy, 135 something which is also reflected in the CANARY WHARF commercial property market in Canary 130 PRIME CENTRAL LONDON Wharf, with vacancy rates falling and 125 upward pressure on office rents. 120

The other effect at play on prices is the 115 return of the ‘ripple effect’, with house 110 price growth spreading outwards from 105 central London, as it did in previous UK 100 housing cycles. 95

Despite this outperformance in 90 June 12 June 13 June 14 June 15 price growth, average values are still significantly lower than those in Source: Knight Frank Residential Research

2 Please refer to the disclaimer at the end of this report to further change perception away from FIGURE 3 ‘pied a terre’ to ‘home’. The opening of Workforce growth CONNECTIVITY Crossrail will enhance its connectivity. Number of employees in Canary Wharf The extension of the appeal of the Canary Wharf estate through mixed land uses, cultural activity and amenity will cement its position as a prime location, and the ripple effect will provide an uplift to the wider Nearly thirty years ago, Canary Wharf market in the Isle of Dogs. was one of the most redundant areas of London. Today, as one of the Economic primary business hubs in the world, it is one of the most well-connected outperformance districts in the capital. Employment in Canary Wharf almost quadrupled in the 10 years to 2012, with the number of workers rising from 27,000 to over 100,000 during this time, according to figures from the ONS. The majority of jobs in the area are in 100,500 finance and insurance but there has been 27,400 The Jubilee Line provides quick notable business growth in emerging access to London Bridge, Bond tech industries. Street and north west London while Already some 7,000 employees the Docklands Light Railway (DLR) work in the technology, media and connects the area to the heart of the telecommunications (TMT) sector in City of London. London City Airport, Canary Wharf, helping London to clinch 2001 2012 which hosts flights to Europe’s the title of the ‘Fintech’ capital of Europe. Source: Knight Frank Residential Research / ONS major economic centres, is less Fintech start-ups based in Canary Wharf than 20 minutes away. The Jubilee benefit from being in close proximity to In terms of economic growth, Tower line will also become one of the first lines to have a 24-hour service on their natural client base in the banking, Hamlets has outperformed the UK for Friday and Saturday evenings from financial and professional services sectors. the past few years. Annual Gross Value the autumn of 2015. Added, a measure of economic activity, Some 40,000 additional jobs are forecast rose by 2% in 2013 and 3.8% in 2014, to be created in Tower Hamlets, the compared with 1.9% and 3% respectively borough in which Canary Wharf and across the UK. the Isle of Dogs are located, by 2025, according to Experian. Growth is expected to average 3.9% per year over the next five years outperforming both the UK and London over this time. From late 2018, Canary Wharf, as FIGURE 2 well as the nearby Royal Docks and Economic growth As well as strong economic growth and Queen Elizabeth Olympic Park, will be Total annual output (GVA) job creation, there will also be notable served by three Crossrail stations. The population growth. An extra 57,325 high-speed rail service will cut journey TOWER HAMLETS households are due to be created during 10% LONDON times to many destinations, with UK FORECAST the coming decade in the wider borough passengers able to reach Liverpool of Tower Hamlets, a 20% increase. This is Street in 6 minutes, and Heathrow in 8% a faster rate of growth than in London as less than 40 minutes. It will be the first whole, which is forecast to see a 13% line to directly connect London’s West rise in the number of households over the End, the City and Canary Wharf. 6% next decade. The station at Canary Wharf is already open and hosts a number of shops, 4% Emergence of a new restaurants and a cinema. The rooftop cultural centre is a public garden. 2% Canary Wharf and its surrounds are also emerging as a hub for culture and 0% entertainment as London’s ‘cultural 2011 2012 2013 2014 2015 2016 2017 2018 centre of gravity’ is enhanced by activity Source: Knight Frank Residential Research / Experian in the East.

Please refer to the disclaimer at the end of this report 3 EASTERN PRIME 2015 RESIDENTIAL RESEARCH

There is a popular arts and events across East London is changing. There FIGURE 5 programme already hosted on the Canary are plans for a £3.5 billion regeneration A growing borough Wharf Estate, with live music shows, project at Silvertown Quays, which will Forecast increase in private household population outdoor dance performances, sporting provide housing, retail and commercial Indexed to 100 = 2014 events, open-air theatre and exhibitions. business space. At Royal Albert Dock, a 125 125 TOWER HAMLETS TOWER HAMLETS As part of the wider shift east, the English £1.7 billion commercial hub for Chinese LONDON LONDON National Ballet (ENB) has announced and other Asian businesses is being 120 120 plans to relocate from its existing home in created by ABP. Kensington to London City Island, close 115 115 Businesses will also benefit from to Canary Wharf. The new facilities will Crossrail, with a wider pool of potential include space allowing members of the 110 110 employees to draw from, as shown in the public to see the ballet company’s work. commuter map (figure 2). 105 105 The ENB is not alone. In the neighbouring borough of Newham, there are plans 100 100 for a new education and cultural district Broadening appeal As part of the continued development 95 at the Queen Elizabeth Olympic Park. 95 The Victoria and Albert Museum, one at Canary Wharf, access to schools is 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 of the most recognizable landmarks in set to improve. As well as the opening 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Source: Knight Frank Residential Research / GLA Kensington in West London, is set to of a primary school for 420 pupils, a display more of its collection in a new first for the immediate area which will space opening in the Park. enhance its appeal to growing families, The park may also become home to the the opening of Crossrail will make top- first base for the Smithsonian outside tier schools across London even more the US. Added to this, there are plans for accessible from Canary Wharf. University College London to open a campus in the area. Aspirational retail The layout of the new public realm in the A new business centre Canary Wharf Estate will create a vibrant There is also regeneration planned further and attractive high street with cafés, to the East, emphasizing how a wider area restaurants and daily markets.

FIGURE 4 How Crossrail will expand the 30 minute ‘commuter zone’ from Canary Wharf

Enfield Canary Wharf station Crossrail route Current commuting zone, 30 minutes travel time New commuting zone, 30 minutes travel time with Crossrail

Romford

Liverpool Street West Ealing Paddington Canary Wharf !

Greenwich

Dartford Clapham

Source: Knight Frank Residential Research

Please refer to the disclaimer at the end of this report 4 EASTERN PRIME 2015 RESIDENTIAL RESEARCH

Adding to the high street and luxury outlets Canary Wharf Group has already begun FIGURE 6 already accessible at the Canary Wharf work on Canary Wharf Residential, a A diverse community shopping malls, a range of independent mixed-use scheme of over 3,000 new Age of buyers and tenants in Canary Wharf (2014) retailers as well as more luxury brands homes, including over 600 affordable are set to arrive in the coming years, units, a school and a medical centre. Tenants Buyers reinforcing the area’s position as a The scheme will expand the estate from Tenants Buyers destination shopping location. 100 acres to 122 acres.

These will add to the attraction of an Berkeley Homes has permission to area which also boasts a host of leisure build a residential tower on Marsh activities, recently boosted by an Wall, which, once complete, will be additional Everyman cinema complex at the UK’s tallest residential building – the newly finished Crossrail station. surpassing the 181m St George Wharf Tower in Vauxhall.

Key developments Meanwhile Eco World-Ballymore is constructing twin residential towers at There are 14 schemes of around 400 BUYERS Wardian, just across the dock from units or more already under construction the Canary Wharf Estate. or with full planning on the Canary Wharf TENANTS Estate and nearby on the Isle of Dogs, as The scope of expansion highlights the shown on the map below. Some of these transformation taking place in the area, <20 30s 50s 70+ schemes are in the very early stages of with a critical<20 mass30s of development50s 70+ 20s 40s 60s 20s 40s 60s development and will take some years helping to serve the need for housing to deliver. across the capital. Source: Knight Frank Residential Research AUSTRALIA RUSSIA FRANCE BRAZIL SWITZERLAND CANADA FIGURE 7 ITALY IRELAND REST Development map Schemes of 100+ units currently under construction or with full planning permission granted

UK US LONDONGERMANY CITY TO THE CITY / AIRPORT WEST END 2014 TO DATE SPAIN AUSTRALIA FRANCE 2013 SWITZERLAND ITALY RUSSIA ( BRAZIL Providence Tower CANADA Newfoundland IRELAND CROSSRAIL Developer: Ballymore Developer: Canary Wharf Estate ( REST Units: 484 Units: 611 CANARY WHARF

City Pride Developer: Chalegrove Properties CANARY Canary Wharf Residential WHARF Units: 822 Developer: Canary Wharf Group THE O2 Units: 3,610 HERON QUAYS Wardian London Developer: Ballymore Group ( Dollar Bay Units: 792 ( Developer: Mount Anvil Units: 121 SOUTH QUAY Developer: Berkeley Homes Development Pipeline Units: 888 No. of units

under 150

151-500

501-1,500 Baltimore Wharf Developer: Galliard Homes / Ballymore Crossrail Units: 1,111 London Underground 1,501+

DLR

Source: Knight Frank Residential Research NB: Each circle represents one development

Please refer to the disclaimer at the end of this report 5 GLOBAL BRIEFING For the latest news, views and analysis on the world of prime property, visit KnightFrankblog.com/global-briefing

demographic, and cement its position Outlook as a key prime London location. RESIDENTIAL RESEARCH Knight Frank’s current forecasts show This position is emphasised by the shifting Gráinne Gilmore a steady and sustainable rate of growth of London’s economic and cultural Head of UK Residential Research across the London market. Residential ‘centres of gravity’ further eastwards as +44 20 7861 5102 prices are expected to climb by a [email protected] well as the eastwards expansion of the cumulative 26% between 2015 and 2019. boundaries of prime London, reflecting the Oliver Knight Within this wider trend across London, increased popularity of East London living. Residential Research +44 20 7861 5134 the maturing of Canary Wharf as a prime [email protected] residential market is expected to continue, FIGURE 8 underpinned by the delivery of new London leading RESIDENTIAL DEVELOPMENT amenities and infrastructure upgrades Households in London and the UK’s Charlie Hart such as Crossrail. expectations for future house prices Residential Development, City and East +44 20 7718 5222 The planned residential developments, Prices rising 90 [email protected] the amenities and ‘place-making’ UK which will accompany them, should 80 LONDON Raul Cimesa Residential Development, City and East also serve to mark a sea-change in the 70 +44 20 7718 5227 area’s community. 60 [email protected] No Canary Wharf is currently primarily home change 50 Mark Wilkinson to younger residents, with those under 40 London Residential Development 40 making up a much larger proportion +44 20 7861 5414 30 of buyers and renters than in other prime [email protected] 20 NB: A score of 50 equates to no change, London neighbourhoods, according to above or below representing growth or Nick Parr Knight Frank data. 10 decline respectively Residential Development, City and East 0 +44 20 7718 5224 The creation of new homes pivoting Prices [email protected] falling Feb Feb Feb Feb Feb Feb Feb around a new school, Crossrail and new 09 10 11 12 13 14 15 James Barton office space for creative and technology Source: Knight Frank Residential Research / Residential Development, City and East firms will enhance its appeal to a wider Markit Economics +44 20 7718 5266 [email protected]

Knight Frank Residential Research provides strategic advice, consultancy services and forecasting to a wide range of clients worldwide including developers, investors, funding organisations, corporate institutions and the public sector. All our clients recognise the need for expert independent advice customised to their specific needs.

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LONDON CROSSRAIL ANALYSING PROPERTY MARKET PERFORMANCE HOTSPOTS FROM READING TO SHENFIELD 2015 RESIDENTIAL DEVELOPMENT OPPORTUNITY AREAS 2015 Disclaimer © Knight Frank LLP 2015 – This report is published for general information only and CITY CENTRAL not to be relied upon in any way. Although EXAMINING LONDON’S NEW PRIME RESIDENTIAL DISTRICTS FROM FARRINGDON TO WHITECHAPEL 2015 high standards have been used in the HOW HAVE PRICES MEASURING SUPPLY OUTLOOK HOUSING DELIVERY IMPROVING TRANSPORT PERFORMED? ESTABLISHED PRIME GROWTH AS A FUTURE ACROSS LONDON INFRASTRUCTURE MARKET FORECASTS RESIDENTIAL MARKET COMMERCIAL DISTRICT TRENDS preparation of the information, analysis, views The Wealth Report London Development Crossrail - 2015 London: City Central and projections presented in this report, no 2015 Hotspots 2015 - 2015 responsibility or liability whatsoever can be accepted by Knight Frank LLP for any loss or RESIDENTIAL RESEARCH RESIDENTIAL RESEARCH RESIDENTIAL RESEARCH RESIDENTIAL RESEARCH UK RESIDENTIAL MARKET FORECAST damage resultant from any use of, reliance on

TENANT SURVEY: HOUSING FORECAST OVERVIEW The Conservative Party’s recent surprise election victory has led to a spate of frothy house-price forecasts. The reality is likely to be more or reference to the contents of this document. EASTERN LONDON LONDON FOCUS sober, argues Liam Bailey We last reviewed our UK house-price Speech, and with the benefit of a month’s London has seen the biggest growth renters are the most likely to factor the In terms of location vs affordability, a Headlines May 2015 forecast in February. At that point, despite a post-election market activity. in the private rented sector out of distance of a rented property from transport significantly higher proportion of Londoners, Our immediate post-election slowing economy, we left our outlook for OPPORTUNITY RESIDENTIAL any region in the UK over the last links into their decisions, with 58% of 18-24 especially younger tenants, are prepared The risk from higher interest rates, and forecast review has left our existing modest future growth unchanged. Since then decade. The expansion of rented year olds across Great Britain saying it was to live in smaller types of accommodation therefore potential future affordability REGENERATION AND DEVELOPMENT five-year forecast largely unchanged, forward-looking economic indicators, such accommodation as a form of tenure a key factor in choosing a privately rented to ensure they are in a good location at an pressures, global economic risks and the as our own House Price Sentiment Index, As a general report, this material does not has been driven not only by the property. Overall, nearly two-thirds (63%) affordable price. As shown in figure 2, more our risk monitor however has uncertainty surrounding the outcome of the IN EAST LONDON 2014 have begun to tick upwards. REVIEW dynamics of affordability in the London of London tenants surveyed want to be than half (54%) of 18 to 24 year olds said undergone a substantial overhaul promised UK referendum on EU membership THE GENERAL ELECTION AND housing market, but also a preference within a 9-minute walk of a transport they would be happy to live in a studio A majority win for the Conservative Party at by 2017, collectively mean we don’t foresee an immediate upswing in UK price growth for more flexible living arrangements. link such as the bus stop, tube or train flat (with communal entertaining space) Cumulative growth in UK prices will the General Election on 7 May, means fears THE PRIME LONDON MARKET station, compared to 51% of tenants if doing so made the rent more affordable of weak government for the next five years above our existing forecast. AffordabilityWe have drilledClose down to into theClose results to Close to Close to Close to Close total a little over 18% in the five years work/ transport shopssurveyedfriends across and Britain.amenities to good in a central area. Some 39% of 25-34 year have, in the short-term at least, disappeared. Although our view on prime London prices of our country-wideuniversity tenant survey,links the family (cafes, gym etc) schools to the end of 2019 SPRING 2015 olds and 42% of 35-44 year olds in London In light of this, and allied to improvements has turned positive, we are monitoring the largest survey of this type ever conducted, would also be prepared to choose a studio in economic and consumer sentiment, we volume of new housing supply, especially necessarily represent the view of Knight Frank to focus on the private rental trends in FIGURE 2 in a central location for an affordable rent. While political risk for the prime have revisited our forecast for UK house- new-build, which has the potential to weigh London, to help inform and shape thinking Space vs Location % of respondents who would consider living in a When asked if they would live in a “micro- London market has fallen, affordability price growth. on price growth. on how the sector may develop. studio flat making central locations more affordable flat”, a small studio flat around 300 sq ft in constraints and rising stock volumes However, with the exception of moving the In terms of key risks, while we have The first key finding is that Londoners, size, in a building with communal entertaining will limit price growth in the near term prediction for our Prime Central London downgraded the impact of political risk, while just as concerned with the space which was in a “perfect” location, 45% Index from 0% to +1% in 2015 (there appears we remain mindful that the previous affordability of rental accommodation as 18-24 of 18-24 year olds in London indicated that UK rents and prime central London sufficient momentum in central London to Conservative-led administration was arguably those in the rest of Great Britain, place they would consider such an option, while rents will rise 2.2% and 3.5% deliver modest positive growth this year), we the most activist in recent history regarding LLP in relation to particular properties or much greater emphasis on proximity 32% of 25-34 year olds and 37% of 35-44 25-34 have held firm on our view for other markets high-value property taxation. But interest rate to transport links, as shown in figure year olds also agreed. This is much higher respectively in 2015 for the moment. We will be reviewing our and global economic uncertainty in our view 1 below. Nearly four-fifths (79%) of than the overall GB average of 27%. 35-44 figures again in June, following the Queen’s remain the key risks for house prices. respondents based in London said When it comes to the maximum Londoners Interest rate rises and the risk of a that being close to transport links was are prepared to pay in rent, the figure is renewed global economic slowdown important to them when choosing 45+ slightly higher than the country-wide average. LONDON (BY AGE) remain the biggest risks to the UK Knight Frank Residential Market Forecast May 2015 privately rented property. This fits with the The mean average of our survey responses housing market increased dependence on public transport for those in the Capital shows that the projects. Reproduction of this report in whole Average 2014 2015 2016 2017 2018 2019 2015-2019 in the Capital, and is also supported by GB maximum respondents were prepared to 60 Mainstream residential sales markets ALL the uplift in capital values seen around pay was 42% of their gross monthly 0% 10% 20% 30% 40% 50% 60% 25-34transport (UK) links in the sales market, for personal income, compared to 40% UK 7.2% 3.5% 2.5% 3.0% 4.0% 4.0% 18.2% 50 LONDON ALL example, Crossrail stations. Younger Source: Knight Frank Tenant Survey 2014 across Britain. London 17.8% 3.5% 4.0% 5.0% 5.5% 5.5% 25.8% FIG2 South East 10.6% 5.0% 3.0% 3.5% 5.0% 5.0% 23.4% 40 South West 8.0% 4.0% 2.5% 3.0% 4.5% 4.0% 19.3% FIGURE 1 Which of these are important to you when choosing a rental property? FIGURE 3 East Anglia 9.8% 4.5% 3.0% 3.5% 4.5% 5.0% 22.2% 30 % of respondents who identified each factor or in part is not allowed without prior written % of respondents prepared to pay East Midlands 6.0% 3.5% 2.0% 2.5% 4.0% 4.0% 17.0% more than 40% of gross income 20 West Midlands 6.8% 3.5% 2.0% 2.5% 4.0% 4.0% 17.0% on rent: North East 4.4% 3.0% 2.0% 2.0% 3.0% 3.5% 14.2% GB 10 North West 3.8% 3.0% 1.5% 2.0% 3.5% 3.5% 14.2% LONDON Yorkshire & Humber 1.5% 3.0% 2.0% 2.0% 3.5% 3.5% 14.8% 18-24 0 LIAM BAILEY Wales 1.4% 3.0% 2.0% 2.5% 4.0% 4.0% 16.5% 18 25 40% 50% 60%+ Don’t 18-24 Global Head of Research -24 -34 know 25-34 Scotland 4.2% 3.5% 2.5% 3.0% 4.0% 4.0% 18.2% approval of Knight Frank LLP to the form LONDON 35-44 25-34 “ Don’t assume the election Prime residential sales markets 45-54 33% result means political risks Prime Central London 6.7% 1.0% 4.5% 5.0% 5.0% 6.0% 23.3% 35-44 Prime Outer London 10.5% 3.0% 5.5% 5.0% 5.0% 5.0% 25.8% 55-64 85% 85% 53% 79% 55% 58% 51% 55% 33% 39% 34% 29% 12% have disappeared for the LONDON 7% GB prime London market.” Residential rental markets 65-74 45+ 25% Follow Liam at @LiamBaileyResi UK Mainstream 2.0% 2.2% 2.3% 2.3% 2.4% 2.4% 12.1% LONDON (BY AGE) 75+ Prime Central London 4.0% 3.5% 3.3% 3.3% 3.0% 3.0% 17.1% Affordability Close to Close to Close to Close to Close to Close For the latest news, views and analysis and content within which it appears. Knight transport work/place shops amenitiesAveragefriends and to good Prime Outer London 0.5% 4.0% 3.3% 3.0% 2.8% 2.8% 16.8%

GB on the world of prime property, visit PRICE PERFORMANCE THE RESURGENT links of study (cafes, gym etc) family schools CANARY WHARF ROYAL DOCKS E20 POST-ELECTION ANALYSIS UK MAP OF LONDON RENTAL MARKET Global Briefing or @kfglobalbrief Source: Knight Frank Residential Research 0% 10% Source:20% 30% Knight40% Frank Tenant50% Survey60% 2014 0% 10% 20% 30% 40% 50% 60% Source: Knight Frank Tenant Survey 2014 FIG5 Frank LLP is a limited liability partnership London: Eastern London Residential UKThe Tenant Survey - UK Housing Market registered in England with registered number Opportunity Report - Review - Spring 2015 London Focus Forecast - May 2015 OC305934. Our registered office is 55 Baker 2014 Street, London, W1U 8AN, where you may Knight Frank Research Reports are available at KnightFrank.com/Research look at a list of members’ names.