Raising the Roof

RAISING THE ROOF

London’s skyline is set for a dramatic transformation over the next ten years. How high will we dare to go?

UK Research, September 2015 Central London Development jll.co.uk/residential sacrosanct skyline. sacrosanct will prove a defining a defining prove will momentous times for for times momentous age for our previously previously our for age These are exciting and exciting are These London. The next decade next The London. The are taller in located towers central parts expensive the of more and slightly of are there plenty But Capital. to across set spring up towers shorter of benefit the for and London Greater ordinary Londoners.

RESIDENTIAL RESEARCH NEIL CHEGWIDDEN OUR VIEW JLL problem in this London, is still problem not our meet sufficient to growingneed. support Tower ready towers of wave There is a sudden a scaleto on skyline and transform the in seen London. before never height and There signs are this that some may the but 12-24 next months the ease over certainly delivery of more looks volume as is our perennial However, healthy. RAISING THE ROOF RAISING THE evolution. Never before has it been viewed as a modern, progressive and a modern, as progressive been viewed it has before Never evolution. London stands at the precipice of a monumental and defining stage in its its in stage and defining a monumental of precipice the at stands London more than a 10% increase in population over the next decade and a raft of new decade new next and a raft of the over population in 10% a increase than more flamboyant city. It is renowned and revered for its history and tradition. But with with But and tradition. history its for and revered renowned is It city. flamboyant towers set to transform its skyline, London is set for a new era in its development. its in era a new for set is London skyline, its transform to set towers They are building notably more more areThey building notably units of under The number homes. construction has escalated from 10,000 years tofour ago 30,700 today. well as the confidence confidence instilledby as the a well stronger UK and London economy. Developers are still to build,Developers keen housing, of undersupply the by buoyed demand, of strengththe depth and price points, as lower especially the at of stamp duty need urgent review. urgent need duty stamp of upbeat Developers playing anplaying A £2m instrumental role. carriespurchase now an additional bill. rates The duty new stamp £53,750 The £1.5m+ market is notably more more is notably market The £1.5m+ which rates duty stamp New sensitive. are last intocame December force now remains strong and active withremains prices active and strong is both robust, Demand rising steadily. purchasers. overseas and from domestic The Central London residential residential The Central London development sales market has £1.5m, Thedivided into sub two. sector, particularlyand £1m sub the Divided market Divided

CENTRAL LONDON DEVELOPMENT 2 CENTRAL LONDON DEVELOPMENT LONDON CENTRAL This is our #NewResidentialThinking Join the discussion on twitter @NeilChegwidden / @Adam_Challis / @JLLUKResi

IN THIS ISSUE

PAGE NO. DIVERGING FORTUNES CONSTRUCTION ACTIVITY PAGE NO. The Central London sales market is UP FURTHER 06 divided. The market below £1.5m is pretty The number of units under construction 08 active with prices rising, but sentiment is has risen by 18% during the first half weaker above this threshold. of 2015.

rise in prices in units under 1.4% year to H1 2015 30,700 construction

PAGE NO. RAISING THE ROOF Chris Murray, Managing Director London’s skyline will alter dramatically over the next at W1 Developments, gives his 10 10 years. With at least 39 residential towers of 40 or insightful views on developing iconic more storeys due to pierce the clouds in the Capital, skyscrapers in the heart of London. the next 10 years will be a defining period for London as a more modern global city.

PAGE NO. IT’S ALL IN THE MIX London’s local authorities demand that family Mark Connell, JLL Planning 20 housing is delivered wherever development occurs, Director, and Peter Gibney, JLL but does this always work and does it create the Residential Consultancy and communities that councils aim for? Agency Director, give their opinions.

PAGE NO. THE FINAL WORD 23 Andrew Frost, JLL Head of Residential says “I see a vastly different London over the next decade. We have to accommodate an extra one million people and building up, raising the roof as it were, will not only help to deliver greater housing volume, it will also keep our historic Capital city amongst the most spectacular in the world.” CENTRAL LONDON DEVELOPMENT LONDON CENTRAL

JLL CENTRAL LONDON DEVELOPMENT RESEARCH AREAS AND PRICE RANGES 4

NORTH

CENTRAL NORTH

EAST WEST END

CITY

CENTRAL WEST RIVER CANARY CENTRAL WHARF WEST

OUTER RIVER CENTRAL OUTER SOUTH RIVER SOUTH EAST

SOUTH WEST

Source: JLL CENTRAL LONDON DEVELOPMENT LONDON CENTRAL

JLL research parameters 5 JLL Central London residential development research covers the areas depicted in the map shown. Broadly speaking this covers Underground Zones 1 and 2. Within this area we define two main sub-groups; Core and Outer Core. The various shades of red in the map show the Core areas, while the orange regions are Outer Core. The table below shows the range of typical values within each area.

In Core markets we track developments of 25 or more private units, and in Outer Core the threshold is 50 units.

CENTRAL LONDON NEW DEVELOPMENT SUB-MARKET PRICING (£PSF)

MAXIMUM AVERAGE MINIMUM

CENTRAL WEST £6,250 £1,750 £950

WEST END £4,000 £1,650 £900

CENTRAL RIVER £3,500 £1,500 £1,000

CITY £3,000 £1,300 £850

CENTRAL SOUTH £3,500 £1,250 £850

CENTRAL NORTH £2,600 £1,250 £800

CANARY WHARF £1,400 £1,150 £850

OUTER RIVER £1,050 £800 £550

NORTH £1,250 £750 £550

SOUTH WEST £1,200 £700 £550

WEST £1,100 £675 £500

SOUTH EAST £900 £650 £450

EAST £850 £625 £450

CORE OUTER CORE Source: JLL 1.4% Average price increase in year to H1 2015 New units sold in Central London in H1 2015 6,000 In 6,000 of excess unit sales occurred during This 2015. H1 than is more than half-yearly higher 25% the preceding the years, four over average preceding the two below is slightly but half totals. yearly There were just under 2,500 under just There were sales a far more and stronger during but Q1 typical 3,500 sales during Q2. result of the price sensitivity issues, issues, price sensitivity the of result now and has remained positive but having pa 13.7% been 1.4% stands at a yearpa earlier. Not surprisingly the volume of sales of surprisingly volume Not the has markets expensive most in the to areas as these continue slowed and issues taxation bear of brunt the weaker sentiment. expensive less the of some But significantly have Core submarkets there example, increased sales. For 600 over were unit sales in both Canary and Central South Wharf during 2015. H1 Price growth slows Price growth has as eased a down

there were 6,700 new unit launches unit launches new 6,700 were there during a 12% 2015, decline H1 from in 7,600 Outer But inthe H2 2014. unit 6,100 launches the Core markets to 4,300 fell just in H2 2014 units during first the half a of this year, decline. 29% Sales activity steady to led inevitably have launches Fewer up activity has held sales, but fewer of interruption the despite quite well the general election. Launches down Launches The first half a has of witnessed 2015 scheme of drop number in the notable especiallylaunches, in Core Outer uncertainty with the submarkets, surrounding election general the a contributory undoubtedly in May has been there Importantly, factor. an increase in in Q2 and releases late highinto with Q3 several profile and successful launches. Central London of Across whole the Demand for London residential residential London for Demand from strong the isproperty reasonably has Kong and EastMiddle Hong and currency in Malaysia by helped been shifts. in China Recent events have is sentiment while appetite dampened quite weak in Singapore. now Overall, is international demand steady. mixed but DIVERGING SENTIMENT price sensitive as a result of the stamp duty reforms last year, which which year, last reforms duty stamp the of a result as sensitive price Sentiment and activity in the Central London new development sales sales development new London Central the in and activity Sentiment market has picked-up since the general election. But the market is now now is market the But election. general the since picked-up has market Recent events in China have also instilled a little caution into the market. market. the into caution a little instilled also have China in events Recent have assumed centre stage following mansion tax and election concerns. concerns. and election tax mansion following stage centre assumed have well as other economic and political and economic as other well factors, are also demand on impacting from different parts globe. the of Much international demand, however, however, international demand, Much location price and has become dependent. Currency devaluations, as some positive price growth. positive Owner some are investors and both occupiers part. their playing sits below this price level and is and also this price level below sits Core Outer focussed submarkets. on are market the of These segments activity of and with plenty quite busy, Demand drivers Demand demand domestic of The majority The real larger change step is for prices are units where in locations £1,500north of psf. submarkets is still as highly active submarkets £1m the below prices are generally price point. an increasingly burdensome taxan hit. increasingly burdensome in Core Outer The locations market units smaller in for and Core purchases below £1m attract lower lower attract £1m purchases below while than before duty stamp anything this incurs price point above market and have created a divide in have and market £1.5m. below and above conditions mean that broadly The reforms The stamp duty reforms from last reforms duty The stamp role a key playing areDecember now development Centralin London the Price sensitive

CENTRAL LONDON DEVELOPMENT 6 CENTRAL LONDON DEVELOPMENT LONDON CENTRAL

CENTRAL LONDON SALES EASE Number of unit sales per half year

H1 2014

H2 2014 H2 2015 6,700 6,400 6,000 5% DECREASE LAST 6 MONTHS

Source: JLL, Molior 7

PRICES STILL EDGING UP Price growth per half year

Lower value properties and areas 5.1% 0.7% 0.7% 1.4% have seen stronger price growth over H1 2014 H2 2014 H1 2015 INCREASE the past 6-12 months and there is YEAR TO H1 2015 a fair range of growth rates across Central London (see map). Source: JLL

Smaller units in Outer Core markets have witnessed average price growth of 2.8% pa while at the other end of HIGHER PRICE GROWTH IN OUTER CORE the scale larger units in Core markets Price growth in year to H1 2015 have seen prices fall by 1.5% pa on HIGHEST North % average over the past 12 months. Central 1.4 North % Outlook less certain 0.8

The near-term outlook has East HIGHEST North West End 2.4% become more uncertain in recent % % Cen0.3tral 1.4 weeks following China’s currency City North % LOWEST devaluation and stock market woes 0.8% 0.5 West Central River Canary which have unsurprisingly caused % Wharf 1.4 Central % 1.0 % concerns across the world. West 1.3 East HIGHEST -1.3N%orth West End 2.4% 1.4 % % However, the UK economy remains Central 0.3 North Central City not only robust but strong, at least O%uter River % LOWEST 0.8 % South 0.5% 2.6 % 0.5 for now, with London particularly 0.8 South HIGHESTEast CORE NorthWest % Canary % Central Rive4.5r buoyant. London’s safe haven status % East Wharf Central 1.4 1.4 Central % 1.0 % % will undoubtedly stand it in good North West EnSdouthW Weesstt 2.4 1.3 2.2% % % stead too. 0.8% 0.3 1.2-1.3% OUTER CORE City 0.5% LOWEST East It will take time for the Chinese Central West Outer River % Canary West End Cent2.4ral River South issues to fully unravel and for their % % % Wharf 0.5% 1.40.3 Centra2.6l % % 1.0 0.8 % CORE full impact to materialise, but until City 1.3 South East West % then the London residential market -1.30.5% % LOWEST4.5 will press ahead with optimism, albeit Canary West Central River South West 2.2% tinged with some measure% of caution. Wharf 1.4 Central % Central % Outer 1.Ri0ver % 1.2 OUTER CORE West 1.3 % South 0.5% % 2.6 % -1.3 0.8 South East CORE 4.5% Central Outer River South West % South 0.5% 2.2% 2.6 % % 0.8 1.2 South East CORE OUTER CORE Source: JLL 4.5%

South West 2.2% % 1.2 OUTER CORE

total and lower than the average of of than average the total lower and 11,600 units half per year during the preceding years. four at units of The either total number permission or planning application unbuilt in or stage, existing schemes, firstleast the at has fallentime in for four years. These figures that suggest to be set activity could development peak soon. Eastern activity 13,000Over 30,700 units the of construction in under currently a staggeringCentral London, 43%, are London. east to of the 8,000Over in units our are underway East region with a further 5,000+ East. South in units site the on towards bias There is also a huge in East termsEast London South and units planning in the residential of pipeline (see map). The volume of units of grantedThe volume 8,900, at 2015, inpermission H1 H2 2014 10,700 the alsowas below

Pipeline falls for first time There has a sharp been slowdown units of entering number in the planning. for units of applied The number 5,400 just was during 2015 which H1 than less a thirdwas 17,300 the of circa the below well and in H2 2014 10,000 units five the in of each preceding in the half-years. A pause is the election to general run-up the most likely explanation. Only 3,700 units were completed completed Only units 3,700 were during first the half of This2015. a 12%was increase 3,300 from the remainsfinishedduringbut H2 2014 subdued the following woefully low 2-3 of years market ago. development The annual total risen to has now 7,000 units is and expectedto remain below 12 months 10,000 another units for pa in acceleration the point which so at or began activity in which development will2013 start to kick-in. 19,000 in units Outer are underway Central 62%Core the markets, of London total. There remains a significantof volume construction activity in Core markets market weaker slightly the despite conditions for prime product. subdued still Completions PIPELINE IN PIPELINE

SURPRISE FALL surprisingly shrunk during the first half of 2015. Over 60% of units under units 60% of 2015. Over of half first the during shrunk surprisingly Construction activity continues to escalate but the planning pipeline has has pipeline planning the but escalate to continues activity Construction accounting for over 40% of the Central London total. We continue to believe believe to continue We total. London Central the 40% of over for accounting 206% that construction activity will begin to ease a little over the next 12-18 months. 12-18 next the over a little ease to begin will activity construction that construction are in Outer Core submarkets with the East and South East regions regions East and South East the with submarkets Core Outer in are construction Increase in units under construction in past 4 years four years post-crisis a and four ago high. construction in Central London has risen from to H2 18% now 30,700, up three is now times greater It than 2014. Under construction total up again up total Under construction units of The under total number The number of starts of The number in Core Outer from 7,600 units slowed submarkets to 6,000in H2 2014 first in the half thisof year. fringe) had the most starts most fringe) 800 the had at units. also There were in 700 of excess unit starts in Central South. were startedwere during in Core locations from 1,300 up 2015, H1 in H2 2014. City the includes The (which City In a change times, from there recent of number in the a greaterwas jump starts in 2,350 Core markets. units activity over the past three past the years hasactivity over staggering. In more H1 even been 2,9002012 only started. units were Unit startsUnit increased 2015 in to H1 8,300, a rise 9% with H2 of compared The in escalation development 2014. Central London developers have even development of rate their upped further during first the half of 2015. Starts on the rise

CENTRAL LONDON DEVELOPMENT 8 CENTRAL LONDON DEVELOPMENT LONDON CENTRAL

UNIT STARTS CONTINUE TO RISE Number of units started per half year, all Central London

H2 2015 H2 2014 H1 2014

5,800 7,600 8,300 9% INCREASE 6 MONTHS TO H1 2015

Source: JLL, Molior 9

RECORD NUMBER OF UNITS UNDER CONSTRUCTION Number of units under construction per half year, Central London

H1 2015 H2 2014 H1 2014 30,700 21,500 25,900 18% INCREASE 6 MONTHS TO H1 2015

Source: JLL, Molior

EASTERN BIAS TO PLANNED DEVELOPMENT Number of units at application or planning permission stage, or unbuilt in existing schemes, H1 2015

HIGHEST North Central 7,950 North 1,830

East West End 32,300 3,010 City 5,590 LOWEST

West Central River Canary 7,560 Central 2,540 Wharf West 10,290 6,710

Central Outer River 16,690 South 13,500 South East 26,930

South West 2,730

Source: JLL, Molior

One CanadaOne Square in Canary Wharf 235m tallest next is at property the with The Leadenhall Building (The 225m. The next, at Cheesegrater) 22 at development 62 storey 278m, Pinnacle the previously Bishopsgate, construction, will under now and usurp completed. Theall Shard when but towers in residential terms of Solely George St Wharf at The Tower is by far tallest the existing building at circa totalling 181m, 50 storeys. at Strata Multiplex’s Brookfield into soars & Castle 148m Elephant Ballymore’s skyline while London’s PeninsulaPan third is the tallest with 48 extending storeys to around 147m.

London is growing up - slowly tallest The Shard London’s is now tower, standing at approximately 309m is it Although storeys. with 87 a mixed is use building, very there residential. little 1990s building one in with only each rising 25 None storeys. decade above residential. were years firstIn 15 of the contrast, this a millennium witnessed have significant increase in tallbuildings will it 5-10 next in be the but London, skyline will London’s years when recognition. alter beyond 40 of There 39 storeys are towers now under either pipeline, in the more or construction or within planning. The upper strata of London’s London’s of strata The upper remained remarkably skyline then unchanged during 1980s the and RAISING THE ROOF London is now changing, it is finally growing up. growing finally is it changing, now is London UPPING OUR GAME and most prestigious cities, particularly in emerging nations, have have nations, emerging in particularly cities, prestigious and most London is not renowned for its towering skyline. In fact the opposite opposite fact In the skyline. towering its for renowned not is London is true, especially within a global context. Many of the world’s largest largest world’s the of Many context. a global within especially true, is cite its historic fabric and to protect important viewing corridors. But But corridors. viewing important protect and to fabric historic its cite skylines to die for. London has hitherto been proud to be different, to to be different, to been proud hitherto has London for. die to skylines 3 properties were higher than higher 40 were 3 properties all residential. storeys, 230 being primarily residential. 25 structures above 47 were Just Only 35storeys, being residential. ground. Almost 280 buildings of than completed more 20 were storeys during with around decades, these It was the 1960s and 1970s when 1960s the was It 1970s when and startedwe with to higher build a mixture commercial and of rising towers from the residential buildings will that transform London so. or decade next the over The graphic opposite depicts the the depicts The opposite graphic history and in London towers of history how to is also set shows current crop of the be eclipsed by The high rise timeline

CENTRAL LONDON DEVELOPMENT 10 CENTRAL LONDON DEVELOPMENT LONDON CENTRAL

11 LONDON’S HIGH RISE TIMELINE Number of schemes completed during time period, except under construction and pipeline

100

40 Number of schemes

0 1960s 1970s 1980s 1990s 2000s 2010 - Under Pipeline 2015 construction

Residential (25-29 storeys) Other uses (25-29 storeys) Residential (30-39 storeys) Other uses (30-39 storeys) Residential (40+ storeys) Other uses (40+ storeys)

Source: JLL, Skyscrapernews.com, EGi

5 or 10 years ago. 105 or years all properties global global properties all If no towers are built built are no towers If would have foreseen foreseen have would will soar to 17th in the the in 17th to soar will in other cities, London London cities, other in towers – a level no one – a level towers city hierarchy and to an an and to hierarchy city amazing 14th in residential residential in 14th amazing But London is planning London But a high rise If all towers planned the revolution. will built, London aroundget 44 have buildings than more 150m, of with 25 residential. being predominantly London is 45th on the global city city global is 45th the on London of in number hierarchy terms of in of excess buildings completed George St at 150m. Only The Tower Wharf residential. is predominantly is equalLondon 100th global in the of listcity in number terms of 150m. above towers residential

BUT ONLY FOR NOW FOR ONLY BUT GLOBALLY INSIGNIFICANT, INSIGNIFICANT, GLOBALLY during property booms. Few have have during booms. property Few getting built. up ended However, there have been been have there However, than toopportunities higher build to Fanciful date. have tallwe schemes typically drawing on appear boards of landmark views and building and landmark of views laws. height In global comparison terms London to in be seen terms of is nowhere unsurprising not – skyscrapers historic fabric, protection it’s given

CENTRAL LONDON DEVELOPMENT 12 CENTRAL LONDON DEVELOPMENT LONDON CENTRAL

TALLEST GLOBAL CITIES Number of towers 150m or more

All towers 1ST Residential towers HONG KONG

302 226

2ND 3RD NEW YORK DUBAI

188 66 147 101

4TH 5TH 6TH SHANGHAI TOKYO CHICAGO

125 18 118 46 103 56

45TH 17TH LONDON 2015 LONDON 2025

15 1 44+ 25+

Source: JLL, Council on Tall Buildings and Urban Habitat (CTBUH) ? 7

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HARBOUR CENTRAL GALLIARD 42 storeys, 145m high 40 storeys, 150m high WHARF CONVOYS WHAMPOA HUTCHISON 48 storeys, 142m high ROAD BLACKFRIARS 20 PEARL BLACK 42 storeys, 141m high CENTRE STRATFORD HOUSE MORGAN & CATALYST CAPITAL 42 storeys, 147m high TOWER STREET DOON BUILDERS COMMUNITY STREET COIN 43 storeys, 140m high 50 storeys, 170m high * SQUARE VAUXHALL PLC HOLDINGS CLS 50 storeys, 168m high SQUARE MERCHANT 1 EUROPEAN LAND PROPERTY LIMITED 42 storeys, 140m high BANKSIDE QUARTER NATIVE LAND / TEMASEK / HPL / AMCORP 49 storeys, 161m high THE GARDEN * VSM ESTATES 54 storeys, 177m high - SITECANADA C&E WATER SELLAR DESIGN & DEVELOPMENT SOUTH PLAZA QUAY BERKELEY HOMES 68 storeys, 215m high ONE LANSDOWNE ROAD UK GUILDHOUSE 55 storeys, 203m high WARDIAN LONDON * BALLYMORE 55 storeys, 185m high MADISON THE PROPERTIES LBS 53 storeys, 182m high NINEAYKON ELMS DAMAC TWO FIFTY ONE MANAGEMENT CENTRAL SOUTH / OAKMAYNE 41 storeys, 134m high LANDMARK NORTH PROPERTIES CHALEGROVE 75 storeys, 233m high 21 31 18 19 27 32 30 22 33 23 25 28 26 29 24 20 34 LONDON’S UNDER CONSTRUCTION

TRANSFORMING SKYLINETRANSFORMING tallest of these at 237m but there are plenty of others competing in the skies. the in competing others of plenty are there but 237m at these of tallest BALLYMORE 44 storeys, 136m high SOUTH BANK TOWER CIT 41 storeys, 155m high 360 LONDON 360 MACE REAL ESTATE 44 storeys, 149m high GARDENS LOFT MANHATTAN CORPORATION LOFT MANHATTAN 42 storeys, 143m high PROVIDENCE TOWER ST GEORGE ST 50 storeys, 163m high 250 CITY ROAD BERKELEY HOMES 42 storeys, 155m high WHARF BALTIMORE GALLIARD 46 storeys, 150m high MORELLO TOWER REDROW MENTA 55 storeys, 172m high PRINCIPAL TOWER W1 / CONCORD PACIFIC / BROOKFIELD 50 storeys, 162m high ONE BLACKFRIARS CANARY WHARF GROUP WHARF CANARY 60 storeys, 220m high ONE NINE ELMS WANDA DALIAN 59 storeys, 200m high SAFFRON SQUARE BERKELEY HOMES 45 storeys, 151m high THE LANDMARKTHE PROPERTIES CHALEGROVE 44 storeys, 140m high HALO STRATFORD ASSOCIATION GENESIS HOUSING 43 storeys, 133m high THE DIAMOND TOWER 50 storeys, 181m high STRATA MULTIPLEX BROOKFIELD 43 storeys, 148m high PENINSULA PAN BALLYMORE 48 storeys, 147m high THE TOWER GEORGE ST construction, dwarfing the five recently completed. There are at least a further 26 least at are There completed. recently five the dwarfing construction, COMPLETE schemes in planning or on the drawing board. Greenland’s Hertsmere House is the the is Hertsmere House Greenland’s board. drawing the on or planning in schemes

Incredibly and suddenly London’s skyline is coming of age. We now have a battle in in a battle have now age. We of coming is skyline London’s and suddenly Incredibly landmark. We currently have 13 schemes which extend to 40 or more storeys under storeys 40 more or to extend which schemes 13 have currently We landmark. the sky, with competition between developers as to who can build the tallest London London tallest the can build who to as developers between competition with sky, the 1 7 2 3 5 8 9 6 4 11 17 13 12 15 16 14 10

CENTRAL LONDON DEVELOPMENT 14 CENTRAL LONDON DEVELOPMENT LONDON CENTRAL ATLAS BUILDING PAN PACIFIC HOTEL 35 41 ROCKET INVESTMENTS AND RESIDENCES 40 storeys, 135m high UOL GROUP 41 storeys, 152m high THE STAGE 36 GALLIARD / CAIN HOY GLENGALL QUAY 42 40 storeys, 134m high TAMERIC 45 storeys, 145m high ALPHA SQUARE 37 FAR EAST CONSORTIUM MILLHARBOUR VILLAGE * 60 storeys, 212m high 43 GALLIARD 45 storeys, 145m high WOOD WHARF * 38 CANARY WHARF GROUP HERTSMERE HOUSE 44 57 storeys, 204m high GREENLAND 71 storeys, 237m high 30 MARSH WALL 39 MW30 MONDIAL HOUSE 45 53 storeys, 185m high BRIDGEWATER PROPERTIES 15 42 storeys, 142m high Source: JLL, Molior

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by the time we finish we time the construction by in three years. Purchasers will also pay the can see feel and they when more fits in the it with how development, arelocal buying into they area, what canand imagine living This there. is marginswhen are made. of £300of to £350 additional psf, so the arecosts an significantly of tower iconic expect to you this get return but higher, in sales terms prices. of back and pre-sales about What financing? pre-sales to need secure You construction funding. Typically around 40% 30-35% or room count of Value). Development (Gross GDV of sell, the The you greater proportion financing your costs competitive more become. pre- only you that view take the We to need secure you senior the sell what loan. The greatest returns your on will selling by closer come investment to completion. JLL helped At Principal have Tower, us sell units. 45% of This for is enough expect prices to rise We further now.

A basic London residential building of residential London A basic cost region in might circa the storeys 10 What are the additional cost implications for towers? well-located and iconic A quality, will in London tower cost around £500 topsf assuming build an excellent offering is being developed. top is of to tower need ensure the You quality design, construction and that it that is and and iconic stands out it possesses all facilities expected the – pool, gym, spa, etc. concierge an issue. riskIn as market see fact, the we diminished quality in a well-located, design iconic The views, better tower. create greater location prime and selling power. BritonsMost are used to vertical not willliving they learn it. but to love UK from the both and buyers With will be plenty there overseas always in the product right the for demand of location. right Tower schemes may consist of 200- of consist may schemes Tower 400 within a huge units is not which is rarely context, so volume London

RAISING THE ROOF HIGH RISE INSIDER HIGH RISE CHRIS MURRAY are developing the Foster & Partners designed Principal Tower in the City. the in Tower Principal designed & Partners Foster the developing are What insight and lessons can we learn from someone who is developing a developing is someone who from learn can we andlessons insight What residential tower in London? We talked with Chris Murray, Managing Director at at Director Managing Murray, Chris with talked We London? in tower residential W1 Developments Ltd who, in conjunction with Brookfield and Concord Pacific, Pacific, and Concord Brookfield with conjunction in who, Ltd W1 Developments MANAGING DIRECTOR, W1 DEVELOPMENTS LTD We don’t see there being any end-user end-user being any see there don’t We is all,risk at assuming developer the standing will and deliver reputable of day. the of end the at product the which, if not factored ifwhich, in, not can kill a deal. What about buyer risk? The high building costs when mean a greater a tower developing exposure to construction cost inflation have escalated to close 20% by have in the increase possibly last year could and 12 months. to next 18 the further over risks when developing a residential in tower London? risk highest the today Unquestionably is around construction costs. These What do you see as the greatest

CENTRAL LONDON DEVELOPMENT 16 CENTRAL LONDON DEVELOPMENT LONDON CENTRAL

Principal Tower

Do you think Britain has the expertise to develop towers? We certainly have limited experience. The skillset is there on all but the build side, but few people have the relevant tower experience. Internationally renowned architects have been in London for years – this is a global marketplace, and companies like JLL have global reach.

But in the UK there are only a handful of contractors who you would commission to do the job. In New York, Shanghai, Hong Kong or Kuala Lumpur you would have your pick from perhaps 20 or 30.

This makes the tendering process tighter, and probably means higher cost.

The other issue is that these firms currently have full order books, especially given the number of developments and towers in the pipeline. So securing a contractor and getting your scheme built when you want – at the price you want - is an issue.

On top of this, the contractors cannot find the construction labour workers. There are simply not enough around. So this impacts on timing and cost as well. CENTRAL LONDON DEVELOPMENT LONDON CENTRAL

Principal Tower

Design-wise what must a Concrete monstrosities from the If you had one message you have tower have? 60s are what most Britons would learned from the Principal Tower The absolute must is that it is iconic. picture as a UK tower. How will the experience what would it be? It must be unique, it must stand out current crop of towers look in 20- To respect London as a unique world and it must be able to stand the test of 30 years’ time? class city. time. So design is absolutely key. Design is of paramount importance and we are not looking 20-30 years London is different. It has a As well as design there is an amenities ahead. We are building for the long- tremendous rich history of commerce, race. You have to provide a gym, spa, term, 100 or more years into the design and culture. You must respect cinema, concierge, a resident’s bar/ future. After all you are selling homes London, you have a responsibility to lounge – anything to add to the service – for today and for future generations. Londoners, you have an opportunity offer. They have to be top drawer and to make your mark but you have an you should push the boundaries as far Designing the right building, adopting unequivocal responsibility to do it right. as possible to set your product offering the right cladding and using the right higher than your competition. materials are all crucial. Anything less - not on my watch. If you are thinking of anything less than The location of these amenities within The building needs not only to be pure excellence then think again. the tower is critical – nobody likes a inhabitable in 100 years’ time, it gym in a basement with no natural still needs to be iconic and it still Respect London. We have a collective light. There is a personal safety needs to exude class, especially in responsibility. element to consider as well – your prime locations. customers need to feel safe and happy in these resident’s areas. It also needs to be designed and built with sustainability in mind. It must be built to last, and that means not scrimping on design, materials or technology. CENTRAL LONDON DEVELOPMENT LONDON CENTRAL

VIEWS SELL TOWERS 19 DRONES AID VISUALISATION

A view, whether it be an iconic location of the building we would landmark such as the Houses of gauge an absolute maximum unit Parliament, the London Eye or The price at the top of the tower and build Shard, or a natural landscape, such this into our thinking. as The Thames or Hyde Park, can add significant value. Penthouses are particularly interesting to price at the top of towers. There is However, before a building is started definitely a preference for lateral living or is complete it can be difficult to over duplex style apartments and there DEVELOPMENT CONSULTANCY perceive exactly what the views will DIRECTOR, JLL will also be a maximum unit price be like as the tower soars upwards. HOLLY STOCK within each location submarket that Views will change at different heights units will transact for. Both of these and floor levels and will be dependent factors will be key considerations when on aspect too. In Islington, the council allow drones we are pricing penthouses. to fly as high as is needed so long as Drones it is safe but in Canary Wharf, Tower At one scheme in Drones have been added to the Hamlets place quite tight constraints. Nine Elms, views over Development Consultant’s tool bag recently. Going up the Thames were We typically add 1-2% to the pricing priced with a circa 100% A drone is a great way to establish of apartments as we move up the premium to inland and how views change as new heights are tower but adjustments are also made railway line aspects. reached and inform when neighbouring for layout, size, aspect, outside space, buildings drop out of view and when ceiling height and specification. improved views come into play. At City Peninsula in Kickers SE10 the best views However, drones are not always the There are also price kickers when eastwards over the perfect answer. Some local authorities views change. For example when clear impose restrictions. In Hackney, for views over and above surrounding Thames commanded a example, JLL were only permitted buildings or when iconic landmarks 10-15% premium. to send a drone up to the 40th storey come into view. of the proposed Principal Tower. As Principal Tower is 50 floors high, There is also a ceiling price for each there were some unfilmed floors. unit type to factor in. So, given the

factors as private developers, not not developers, factors as private constraint the of the to mention socialon their cap tenants. benefit Furthermore, case in products of the – a first as sharedsuch ownership a is rarely ladder housing the on step intofamily a leap home. understandably places a premium on on a premium places understandably tofamily homes for space additional this Whether is through compensate. or child play increased space, open parking – family requirements homes carry on burden a greater space This tightly on matters development. sites. constrained brownfield mix Prescribing these on than compromise Rather have standards, local authorities reacted seeking by to prescribe unit In London, mixes developers. on are that prescriptions typical to up include must developments family25% containing housing three more. or bedroom homes In cases, requirements many these affordable are the focussed upon development the of component housing Associations Housing However, only. are same the limited of many by

the single or couple household. To To household. couple or single the this, planning the overcome system the GLA, acknowledge that lower lower GLA,the that acknowledge are suited to family more densities is true opposite the that and housing, high densities. for potential mismatch lies the Herein and family homes for need the between all of homes to overall need develop the aretypes not in High London. densities encouraging family of homes. the is that wisdom Conventional urban environment is more hostile of families welcoming for more and In the Capital, both the GLA the both In Capital, the their have boroughs London and All recognise assessments. own to substantial need deliver the can be which only housing, additional through buildingaccommodated at densities. higher densities Higher have terms, densities higher In broad for suitable more considered been households without children. Indeed, architectsthe Matrix, Density the of these assessments that local that planning assessments these family – including arepolicies derived policies. housing

MIX MISMATCH MIX

PLANNING PERSPECTIVE units should be permitted in Central London locations. London Central in be permitted should units

London’s local authorities quite rightly demand that developers provide provide developers demand that rightly quite authorities local London’s MARK CONNELLMARK PLANNING DIRECTOR, JLL of London? We question whether a greater volume and proportion of smaller smaller of and proportion volume a greater whether question We London? of sufficient family housing, but is there really a ‘one size fits all’ across the whole whole the across all’ fits size a ‘one really there is but housing, family sufficient demographic assumptions. There is no assumptions. demographic standardised methodology. However, crucial are absolutely assessments the strategic planningfor is from it and These assessments can as look These assessments far as 20 ahead years involve and social and complex a myriad of is to identify the future of is the to quantity identify a breakdown including needed, housing type,by size. and tenure Market Assessments (SHMAs) Assessments Market as part plan-making process. the of The primary assessments these of objective mix philosophy. mix inLocal England are authorities to undertake Strategicobliged Housing Mark Connell explains the wisdom and reasoning behind the unit

CENTRAL LONDON DEVELOPMENT 20 CENTRAL LONDON DEVELOPMENT LONDON CENTRAL

THE BIG QUESTIONS

1 Is there real demand for ‘family housing’ from ‘ordinary 21 London families’ in Central London? 2 Do requirements for ‘family housing’ in Central London lead to ‘family- oriented neighbourhoods’ as desired? 3 Are larger, family units too expensive for ‘ordinary London families’ in Central London?

4 Are requirements for ‘family housing’ too onerous in Central London? 5 Are requirements for ‘family housing’ stifling development?

In many boroughs the prescriptions approach to ensure balanced and trends, and unit sizes are particularly have expanded to include private sustainable communities. sensitive to the assumptions housing. However, the private sector is underpinning the methodologies. subject to under-occupation as people From either perspective, the success often seek to maximise the space they of these unit mix policies is difficult Reduced housing delivery can acquire rather than purchase on to judge. Few targets are achieved in Whether correct or not, this forensic the basis of the bedroom standard. practice, but many councils argue that approach to housing mix presents Family-sized homes do not necessarily delivery of family homes would be even another challenge to overall housing house families. But they do cost more lower without the leverage provided by delivery in London. And, unless this in an already inaccessible housing such planning policies. data is used with pragmatism by local market for Londoners. authorities there is a danger that Let’s return to the premise that London ‘paralysis from analysis’ will result. Social engineering needs a higher proportion of family Depending on your viewpoint you homes than the market is providing Dogmatism may achieve a greater may regard housing mix policies – as evidenced by many SHMAs. It proportion of family housing, but as an unnecessary form of social should be noted that the authors of ultimately there will be less housing engineering that fights against the the reports are keen to point out that delivered, exasperating London’s market, or alternatively, a necessary SHMAs are best guesses of bigger already chronic undersupply problem. 2 49% 1 6% 45%

0/1 bedrooms 2 bedrooms 3+ bedrooms 3 1 2 3 Source: JLL JLL LOOKED OVER 1,100 AT UNITS, IN 40 SCHEMES, WITHIN THE CENTRAL ACTIVITY ZONE (CAZ), UNSOLD POST-LAUNCH. THE MAJORITY VAST ARE LARGER UNITS unit number and not floor area; not and and unit number also greater building cost the of psf units. smaller is valid a perfectly there However, relaxing argument for defendable and current policythe restrictions in to allow market locations central forces and developers to determine mix units of rather appropriate the than authorities, be dictated the to by especially will ultimate result as the affordable more of be a greater number units alignment a better and between delivery and demand. There are certainly other limitations buildingon of a greater percentage as measuring units;smaller such by provision housing affordable

wealthy Londoners and which would would which and Londoners wealthy certainly fully be more occupied. as their primary as They their residence. with a garden a house prefer would are and the willing of outside to move CAZ this to goal. achieve in order Being realistic The harsh reality than less is that are half homes of required the number year. each in London being developed larger units, these of one every For are or towhich vacant likely be left part-used,only be creating could we units smaller threetwo, more or less be used to could house which but why Zone 1 or the Central the 1 or Zone why but Activity (CAZ) Zone cannot be treated areas is to London of differently other not clear. questions Tough to need startWe asking hard build new whether about questions CAZ in the apartments are really the living families environments want Our basis. to in a permanent live on families is that experience with the these to buy needed sort money of these want not do larger units simply On the flip side we are seeing a glut we are seeing a glut flipside On the three two, bedroomof four and units for often market remainwhich the on significant(seechart). periods of time to seem be not does The problem understood at or being addressed planning The long-term the level. in family homes for requirement is valid, is ultimately London which is drivingwhat this mix requirement, AGENCY PERSPECTIVE

MIX MISMATCH MIX

eventually lead to greater housing delivery for London. for delivery housing greater to lead eventually of unit mix. Serious questions need to be asked, which could could which be asked, need to questions Serious mix. unit of particular unit types and what is permitted by planners in terms terms in planners by permitted is types and what unit particular There is a fundamental disconnect between market demand for demand for market between disconnect a fundamental is There

PETER GIBNEY & AGENCY DIRECTOR, JLL DEVELOPMENT CONSULTANCY the percentage of smaller units is not units smaller of is not percentage the demand. currentmeet sufficient to due to limitations on the mix the to on of limitations due through policyunits with stipulated where situation a creating planners one of the initial applicants or are or initial the of applicants one arewilling they early up to queue often unlikely to secure these of one units. this of The is partly cause Small units sell the quickest at Small at units quickest sell the Unless launches. scheme London to are be fortunate enough buyers sacrifice space for a central location. sacrifice a central for space attraction unit Small in a central location close to work. Both to close work. in location a central types purchasers are of looking to buy bedroomsmall units, one or studio are and oftenapartments, willing to investors, there is a huge tranche of tranche is a huge there investors, the looking on to a foot get buyers young including ladder property to live want simply who professionals Our Central in London the experience as is as that, well market new-build Peter Gibney offers an agency agency an offers Gibney Peter perspective.

CENTRAL LONDON DEVELOPMENT 22 CENTRAL LONDON DEVELOPMENT LONDON CENTRAL

WHAT DO YOU THINK OF THE UNIT DO YOU THINK MORE SMALLER DO YOU THINK LOCAL AUTHORITIES MIX DEMANDED BY LONDON LOCAL UNITS SHOULD BE ALLOWED IN SHOULD HAVE ANY SAY IN WHAT AUTHORITIES? INNER LONDON BOROUGHS, WITH A DEVELOPERS DELIVER WHEN IT GREATER PROPORTION OF LARGER COMES TO UNIT MIX? UNITS REQUIRED IN OUTER LONDON BOROUGHS?

2 5 1 4 6% 6% 1 6% 6% 4 5 23% 29% 3 3 35% 29% 18% 23 47% 2 18% 30% 47% 3 4 2

1 Far too many smaller units 1 Yes, definitely 1 Yes, definitely 2 Slightly too many smaller units 2 Yes, probably 2 Yes, probably 3 About right 3 Ambivalent 3 Ambivalent 4 Slightly too many larger units 4 Probably not 4 Probably not 5 Far too many larger units 5 Definitely not 5 Definitely not

Source: JLL survey of London developers

THE FINAL WORD “London desperately needs more housing. But crucially it needs the right type of housing in the right locations. That means enough housing at affordable prices for ordinary Londoners as well as providing higher end product for those who can afford and who want to live in Central London. High rise living, whether it is 20, 40 or 60 storeys can help, but only to some degree. Developing these towers on available brownfield land or through converting from other uses implies a certain level of efficiency in our housing development. Utilising brownfield land in urban areas almost guarantees the housing delivered will be in the right kinds of locations. So building towers for the right people, at the right prices and in the right places will certainly help to deliver more homes for London. And the more successful the first crop of towers become, and the more comfortable Londoners are about living in towers, the more other developers will follow. Creating the right neighbourhood structures where ordinary Londoners can live is also vital. This means local authorities should consider relaxing their stance on ‘family units’ in central locations to allow higher densities where appropriate. I see a vastly different London over the next decade. We have to accommodate an extra one million people and building up, raising the roof as it were, will not only help to deliver greater housing volume, it will also keep our historic Capital city amongst the most spectacular in the world.”

Andrew Frost JLL Head of Residential RESIDENTIAL SERVICES

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KEY CONTACTS

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