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Market Update 2nd QUARTER 2016 market Welcome to the second update of 2016, giving you an up-to-date view of update the office, investment & development market in the west of the West End Q2 and providing an insight into prevailing trends in this sector. MARKET SUMMARY As the Referendum drew closer there was a notable rise in caution wider range of rents available during May and June on UK commercial property yields and values than in 2015. In Hammersmith as well as land and residential values. Following the ‘Leave’ vote, and for example the range is £45 despite a ‘Remain’ vote from the central London Boroughs, capital to £55 per sq ft. Two notable value growth is unlikely as vendors and buyers try to fully understand office buildings were launched the economic consequences. in Q2 following refurbishment. Not all parts of London will be affected in the same way and with less The 20,000 sq ft Thames Wharf reliance on the financial sector the west of West End market should Studios, formerly Richard Rogers be less affected than the City of London and Docklands. HQ by the river in Hammersmith and the 42,500 sq ft Clockwork Office supply changes in Q2: Building (mentioned in more detail below). Thames Wharf Studios s RBK&C increased from 1.3% to 2.2% was originally an industrial site containing the Duckham’s oil facility. s LBH&F increased from 8.9% to 14.5% It was acquired by the architects, Richard Rogers Partnership, in 1983 s Paddington increased from 4.1% to 10.7%, and who converted the industrial complex of redundant 20th century s Chiswick decreased from 12.9% to 9.5% warehouses into offices, workshops, housing and a restaurant. On the Prime rents remained at Q1 levels, with rents at £55 per sq ft in ground floor of the site is The River Café which opened in 1987. The Hammersmith with 11,000 sq ft let at 1 Queen Caroline Street to restaurant looks out over a private landscaped area that extends to DHX Media and 9,000 sq ft in two lettings at The Aircraft Factory to the river walkway. The two-storey semi-circular rooftop extension to Vista Entertainment and Clear People, both ‘tech’ companies. Rents the office space, shaped like a ‘bread bin’, was designed by Lifschutz remain at £52.50 in Shepherds Bush, Chiswick, Fulham and Ladbroke Davidson Sandilands, an architectural practice that had offices in the Grove and £73.50 in Paddington. As supply has increased there is Thames Wharf complex but has since moved to Island Studios, 22 St a wider range of specifications for tenants to choose from and a Peter’s Square where Frost Meadowcroft are also based. Q1 HEADLINES On the day of the Referendum the (that became IBM) hence the Clockwork provides all tenants with river views as Clockwork Building was launched to 85 name. Seifert was the architect and well as a private roof terrace on the 5th commercial agents from across London visionary behind London’s Centrepoint floor. The building has been painted black who were invited to a temporary bar and NatWest Tower buildings. He and his and fitted with striking copper signage set up on the penthouse floor and to practice were responsible for creating emulating one of the International Time a lunch cooked by the chef, Tom Hunt. more London-based buildings than Sir Recording Company’s clockwork pieces. This prominent building in Beavor Lane, Christopher Wren and designed over 500 Ravenscourt Park has a rich heritage. office buildings across the UK and Europe. It is stripped back to expose the original It was designed by renowned architect The property has been transformed vaulted concrete ceilings and fitted with Richard Seifert on the site which was to become the highest specification, contemporary lighting, new timber once the home of the world-famous creative sector office building locally. A flooring as well as having a new reception, International Time Recording Company common roof terrace on the 6th floor showers and cycle bays installed. MITSUBISHI partner LEGAL & GENERAL on Hammersmith town-centre scheme Legal & General Property has sold a 50% stake in its proposed £275m office- led scheme at the former Bechtel offices at 245 Hammersmith Road to Mitsubishi Estate London. The joint venture partners will now speculatively develop the 250,000 sq ft office scheme next to L’Oreal’s building which is designed by Sheppherd Robson. Construction is due to start next month and the scheme will be completed in the first quarter of 2019. The site has planning for a 13 floor office building with four shops on the ground floor and a new urban park and plaza in Hammersmith Road. AFFORDABLE HOUSING DILEMMA Why is affordable housing on new schemes rarely 50% of obligations or requirements” the private housing, despite this being stipulated as the In simple terms, if the sum of the cost of the development target in London development plans? (including affordable housing) together with the land value Unfortunately when politicians discuss affordable housing and reasonable profit exceeds the gross development value and stipulate that they want 50% on a particular site, they of the project then the affordable housing renders the site ignore a key complexity in terms of planning; can the site unviable. If the development costs, profit and land value accommodate 50% in viability terms? can be ascertained and are fixed, the only variable that can The National Planning Policy Framework of 2013 in Paragraph 173 states that: be altered is the level of affordable housing to make a site “Pursuing sustainable development requires careful viable. attention to viability and costs in plan-making and decision- Frost Meadowcroft have a department that specialises taking. Plans should be deliverable. Therefore, the sites and in land valuation and during the course of our work in the scale of development identified in the plan should not this respect, when land value is determined we must ask be subject to such a scale of obligations and policy burdens what uses are appropriate in the relevant local authority’s that their ability to be developed viably is threatened. development plan that do not attract affordable housing. To ensure viability, the costs of any requirements likely This enables us to assess the market value of a site. What to be applied to development, such as requirements for the housing developer paid for the site is not as relevant. affordable housing, infrastructure contributions or other In London, if a site is near near an Underground station requirements should, when taking account of the normal cost of development and mitigation, provide competitive the land value for office development is often a good returns to a willing land owner and willing developer to start, otherwise it might be valued as land for serviced enable the development to be deliverable.” apartments or ‘apart Hotel’, a school, college or traditional The key issue therefore is “whether an otherwise viable hotel. Below is a graphic that helps to explain the planning development is made unviable by the extent of planning obligation dilemma better. Affordable housing Return Cumulative policy Site specific mitigation impact of Design standards planning obligations Sustainability measures Community Infrastructure Levy (CIL) Value of of Value Maximum Development amount viably available to meet all obligations Development and land costs Frost Meadowcroft Ltd, Tel: 020 8748 1200 Further information: [email protected] Web: www.frostmeadowcroft.com Articles by Justin Clack, designed by Sue Bunn. To unsubscribe reply to sender or email address above..
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