RESIDENTIAL RESEARCH W2 2014 LONDON MARKET FOCUS DEVELOPMENT POTENTIAL HOTEL TO RESIDENTIAL QUEENSWAY OUTPERFORMS NORTH OF HYDE PARK CONVERSION OPPORTUNITIES PRIME CENTRAL LONDON KEY FINDINGS THE RIGHT SIDE W2 has strong potential for OF THE PARK price growth and offers better Bordered by Hyde Park, Notting Hill, Maida Vale and value than other postcodes the Hyde Park Estate and to be served by a major adjoining Hyde Park. Price growth in other postcodes Crossrail station, W2 has arguably the strongest neighbouring the park exceeded development and regeneration potential of any prime the increase in W2 by an average of 27% in the decade to June central London residential market, says Tom Bill. 2014 Some of the most expensive residential It sits between the established prime Prices for the best new-build property in the world surrounds London’s residential markets of Notting Hill in the west schemes are likely to range Hyde Park. and the Hyde Park Estate in the east. Growth in both areas has outperformed the prime between £2,000 and £2,500 per The 625-acre area of green space is the central London average in the last two years square foot, and in some cases epicentre of the prime central London as buyers seek more value away from markets exceed £3,000 per square foot residential market and properties located further south like Kensington and Belgravia, close to the park can achieve large premiums. which experienced strong growth during the Low risk of oversupply, with While many of London’s globally renowned financial crisis due to their ‘safe haven’ appeal. a total of 239 units with addresses and developments, including In a reversal of what took place last century, permission, 137 of which are Kensington Palace Gardens, One Hyde Paddington station and the surrounding under construction Park and The Lancasters are located close area is undergoing a significant revival, to Hyde Park’s seven-kilometre perimeter, accelerated by the arrival of a Crossrail Compelling case for hotel price growth in one area to the north-west station in 2018, which will place it 10 conversions with hotel prices corner of the park has not traditionally been minutes from Liverpool Street station, 17 ranging between £700 and as strong as its near neighbours. minutes from Canary Wharf and 23 minutes £1,100 per square foot This area, which is outlined in figure 2 from Heathrow airport. and includes the districts of Bayswater, With the affluent Maida Vale residential district There is a premium of 155% for Paddington and Queensway, has a less further north and south-facing views of Hyde properties within 50 metres of prestigious history than some of the Park in the opposite direction, the district has the southern edge of Hyde Park world-renowned property markets further arguably the strongest development potential compared to homes located south, which has occasionally led to the of any prime central London residential between 50 and 300 metres away. informal label ‘the wrong side of the park’. market, meaning that in the 21st century it sits Along the northern boundary the The presence of a mainline rail station firmly on the right side of the park. equivalent figure is 38% at Paddington has, as is often the case, contributed to the fact growth has not FIGURE 1 matched the exceptional performance of Queensway outperforms prime markets like Knightsbridge and Mayfair and central London many formerly grand residential properties in W2 were converted to hotels in the last 115 Queensway Knightsbridge century. 113 PCL Mayfair Similarly Queensway, a shopping street that 111 (rebased to 100) runs through the area as its central spine, 109 has retail units where rents are a fraction of 107 prime West End shopping streets just over a mile away, demonstrating the area’s strong 105 TOM BILL potential. 103 Head of London Residential Research The result is that residential prices in the 101 district have grown by 27% less than other 99 postcodes adjoining the park including W8, “High-quality residential 97 property and proximity to SW7 and W1K in the ten years to June 2014. 95 Hyde Park is a compelling However, what this area of W2 lacks in history Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 combination.” it more than makes up for in geography. Source: Knight Frank Residential Research 2 W2 2014 RESIDENTIAL RESEARCH FIGURE 2 Key residential schemes in W2 1 Queens 6 One Westbourne Gardens 9 52-57 Princes Square PaddingtonUnderground Status Completed Status Complete Q4 2014 Status Full permission - not started Private Units 16 6 Private Units 9 Private Units 8 Developer Derwent London Developer Fruition Properties Developer TBC H Paddington London Paddington 2 Westbourne House 7 119-122 Bayswater RoadWestbourne Terrace 10 The Lancasters 1 Status Under Construction 2 Status Full permission - not started Status Completed and sold Private Units 20 Private Units 22 Private Units 77 Westbourne Grove Developer Alchemi Group Developer Fenton Whelan Developer Northacre / Minerva 3 Inverness Terrace 4 11 3 8 2 and 4 Inverness Terrace 11 13-19 Leinster Square Status Under Construction Status Full permission - not started Status Awaiting Planning Approval Private Units 20 Inverness Terrace Private Units 12 Private Units 15 9 Developer DCD Properties Developer TBC Developer Alchemi Group 5 Porchester Terrace 4 7-12 Leinster Square 12 Leinster House Moscow Rd Lancaster Gate Status Under Construction Bayswater Status Full permission - not started Queensway Private Units 11 12 Private Units 9 Developer Alchemi Group Developer TBC 8 10 7 5 The Hempel Collection 13 13 Westland Hotel Queensway Status Under Construction Bayswater Rd Status Awaiting Planning Approval Private Units 33 Notting Hill Gate Hyde Park Private Units 15 Developer Amazon Property and British Land Developer TBC THE REGENERATION GAP FIGURE 3 W2 development pipeline We believe the above area of W2 will benefit concierge, a gym and a pool attracted from a shift that has taken place in prime buyers to the area and the best apartments 21+ Units 6-10 Units central London in recent years. Demand now sell for in excess of £3,000 per square 11-20 Units 1-5 Units is increasingly focussing on a property’s foot in the re-sale market. characteristics and services and less Where the Lancasters led, others are 25 narrowly on its postcode. following and figure 2 illustrates the key Total number of units… This trend can be seen in figure 1, which developments in the area. While activity is 239 rising, the small number of new schemes shows that Knight Frank’s Queensway 20 residential index has outperformed means there is a low risk of oversupply, with the prime central London average and a total of 239 units with permission in the established prime markets like Mayfair and district, 137 of which are under construction. 15 Knightsbridge over the last 18 months. Prices for the best new-build schemes are likely to range between £2,000 and £2,500 …of which the total under There is no doubt that with domestic construction is and overseas demand for prime London per square foot, and in some cases exceed 137 property rising significantly after the financial £3,000, which compares to £4,000, £5,000 10 crash, buyers have become prepared or even £6,000 for some schemes close to to look outside the traditional golden the other three sides of Hyde Park. postcodes to secure value. Knight Frank research, which compared 5 sold prices within 50 metres of the park and The completion of The Lancasters those located between 50 and 300 metres development in 2011, a 77-unit scheme away, shows there is a premium of 155% Number of schemes near Lancaster Gate with views over Hyde for properties within 50 metres of the south 0 Park, exemplifies this trend and set a new of Hyde Park compared to 38% along Schemes with Schemes under benchmark for quality in the area. the northern edge, underlining the area’s permission construction A high-specification finish and facilities potential. The premium is a result of stronger Source: Knight Frank Residential Research / including underground parking, a 24-hour demand as well as property size and type. Molior / EGi 3 FIGURE 4 The right side of the park RESIDENTIAL RESEARCH Average house prices, year to May 2014 Tom Bill Head of London Residential Research Hyde Park Estate +44 20 7861 1492 Bond Street Notting Hill Marble Arch [email protected] Bayswater Lancaster Gate Queensway LONDON RESIDENTIAL Notting Hill Gate Rupert Dawes Mayfair Head of New Homes Hyde Park +44 20 7861 5445 [email protected] Hyde Park Corner Priya Pannu Knightsbridge High Street Kensington Partner, Residential Development Kensington +44 20 7861 5489 [email protected] Knightsbridge LessLesss expensiveexpex nsis ve Fenella Freeland Belgravia Head of Hyde Park Office MoreMore expensiveexpensive +44 20 7871 5068 [email protected] Source: Knight Frank Residential Research Caroline Foord Head of Notting Hill Office +44 20 7313 9111 The regeneration potential of the area was With W2 noted for a prevalence of hotels, [email protected] further underlined by reports last year that we believe the hotel to residential conversion a wealthy Far Eastern investor had bought option may appeal to developers, providing Chelsea the Whiteleys shopping centre at the north an added boost for gentrification. end of Queensway as part of a wider With hotel prices ranging between £700 and redevelopment plan that may include other £1,100 per square foot in the area, there is parts of the shopping street, which leads a strong and growing financial logic for the onto Hyde Park at its southern end.