Savills World Research

UK Development

Spotlight
London Infrastructure:
Connecting Opportunities

Autumn 2014

SUMMARY
London needs to expand its infrastructure to boost housing numbers
Opening up new parts of the
city by investing in new infrastructure
is essential if we are to deliver
the homes London needs. Savills
believes we need to be building
50,000 new homes a year and that
82% should cost no more than
700 psf with the bulk of that
requirement under 450 psf. (p.2/3)
Costs: To deliver the transport
infrastructure needed by 2050,
London is facing a bill of at least
95 billion. This includes two
Crossrail lines, extensions to the
Bakerloo line, DLR and Overground
as well as some HS2 cost, road
improvements, a new bridge and
a new tunnel. (p.2/3)

Crossrail uplift: Our analysis

shows that growth in property values
in some of the areas immediately
surrounding the new stations have
already outperformed the rest of the
borough ahead of the lines opening
in 2018. But this is by no means
uniform. (p.4/5)
Value uplift potential: Opening
a new station alone, is not enough.
Reduction in journey times must be
accompanied by place improvement
to achieve value uplift potential.
Weve identified the area around a
cluster of stations in the north east
part of the line as having the greatest
potential for future price growth.
(p.4/5)

Importance of placemaking:
Features homeowners value most
about their home are not necessarily
associated with the building itself,
but more with the environment in
which it is located. Delivering mixed
use and creating high quality public
space is essential in creating new
neighbourhoods. (p.6/7)

To deliver the transport

infrastructure needed by 2050,
London is facing a bill of at
least 95 billion
Susan Emmett, Savills Research

savills.co.uk/research

01

London Infrastructure | Connecting Opportunities

Infrastructure

Infrastructure IS key to
boosting housing numbers

New rail and tube lines are essential

to open up more parts of London
for regeneration and homebuilding

ondon is facing
a series of major
challenges. Yet
among the long
to-do list sitting on
the Mayors desk, two items are
particularly pressing if the capital is
to maintain its position as a leading
world city boosting housing
numbers and improving the citys
ageing infrastructure. These two are
inexorably linked as the citys head
count grows.
While the regeneration triggered by
the Olympics has played a huge part
in bringing investment into the area,
there is potential for further growth
with the arrival of the new Crossrail
line from 2018 which will open up new
parts of East London.
The Greater London Authority
(GLA) expects Londons population

Words: Susan Emmett

Twitter: @saemmett

FIGURE 1

Londons population is equal to these 26 cities

How much?
And by 2050
it is projected to
grow an extra:

MANCHESTER
Rotherham

BRISTOL
COVENTRY

WIGAN

MILTON
KEYNES

SHEFFIELD
LEICESTER

LEEDS
DONCASTER

NOTTINGHAM

NEWCASTLE
UPON TYNE

PLYMOUTH

SWANSEA

STOKE ON
TRENT
CARDIFF

BOLTON

LIVERPOOL

Chelmsford

WOKING
WOLVERHAMPTON

BIRMINGHAM

SUNDERLAND

WAKEFIELD
BIRMINGHAM

BRADFORD

KingsTON
UPON HULL

BRIGHTON
& HOVE
BIRMINGHAM

Source: Savills Research

02

to surpass its previous 1939 peak

of 8.9 million within the next few
months and continue climbing to
11.3 million by 2050. The further
31% increase is the equivalent of
adding 2.5 Birminghams to the
citys population. This rate of growth
will place additional pressure on
Londons limited housing stock and
its overburdened transport system.
In previous documents, we argued
that we need to be building at least
50,000 new homes a year across all
tenures and that 82% of these homes
should cost no more than 700 psf
with the bulk of the requirement for
homes under 450 psf.
We must open up more affordable
parts of London in the outer
boroughs to deliver these aims. As a
starting point, this requires improved
journey times and new stations in
neighbourhoods that have been so
far overlooked for development.

To deliver the transport infrastructure

needed by 2050, London is facing a
bill of at least 95 billion.
The cost of Crossrail 1 (running
West to East) is expected to come
in at 14.8 billion. Proposals for a
second Crossrail running diagonally
from South West to North East and
cutting through Chelsea have been
costed at 12 billion.
Smaller projects are no less
crucial. There are proposals for a
3 billion extension of the Bakerloo
line and a 1.7 billion extension of
the DLR between Bank and Victoria.
Extending the new Overground line
to Barking Riverside should cost
about 200 million. This would add
up to 32 billion.
However, figures by Arup for
the GLA (July 2014), list a further
63 billion for road improvements
including a Hammersmith fly-under,
Silvertown tunnel, Gallions Reach
bridge and a portion of the cost for
HS2. It also mentions the possibility
of a third Crossrail line.

Autumn 2014

Northern Line

The announcement of Government

support for the extension of the
Northern Line into Battersea via Nine
Elms in 2012, provided a significant
boost to development in that area.
Construction is expected to start
next spring and complete in 2020,
subject to permission.
This new neighbourhood has
already secured its place on the
prime property map not least
because of Rafael Violys vision
for the power station and the US
governments decision to relocate
their embassy to the area.
Away from the limelight, upgrades to
the rest of the line are to deliver 20%
more capacity, allowing an additional
11,000 passengers at peak hours.
Work is underway and expected to be
complete later in 2014.

Value uplift potential

However, opening new stations

must go hand in hand with place
improvement if we are to see the full
potential value uplift come to fruition.
Our analysis of price changes
along the Crossrail line shows
that property prices in the areas
immediately around the four stations
in the centre west part of the
line, which includes Hanwell, West
Ealing, Ealing Broadway and Acton,
have outperformed the rest of the
borough by almost 23% over the
last five years.
This outperformance is not a
clear trend throughout the line.
Growth in property values in the
areas immediately surrounding the
cluster of stations in the north east
tranche of the line continue to lag
behind the borough average.
However, we calculated that it is
around these stations (Manor Park,
Ilford, Seven Kings, Goodmayes and
Chadwell Heath) that the greatest
value uplift could be delivered
within London tranche of Crossrail,
provided the station opening is
combined with place improvement.
Crossrail has a significant part to
play in boosting housing numbers.

Almost 61,000 new homes (22%

affordable) are set to emerge along
the new Crossrail line which is due
to open from 2018.
However, we believe that
with bolder planning, particularly
building at greater densities around
transport nodes, there is potential for
many more. n

Almost 61,000 new homes

are set to emerge along
the new Crossrail line

BUILDING ABOVE THE STATION

Opportunities for new residential, retail and office space
One of the key ways of delivering higher
densities is by building over and around
transport nodes. Areas around stations
deliver opportunities not only for retail and
leisure development but increasingly housing.
Crossrail is the first scheme of its kind to
be part funded by the revenue generated
from above station property development at
its own sites. The contribution to Crossrails
core funding from the sale of development
opportunities is 545 million.

This must be raised from 12 key overstation developments spanning 3 million

square feet of residential, retail and office
space.
There are currently eight sites where
permission has been granted including
Woolwich station (where Greenwich
council recently gave approval to plans
for 400 homes), and Paddington where
permission has been obtained for a 305,000
sq ft office building.

Opening new
stations must go
hand in hand with
place improvement
Susan Emmett

savills.co.uk/research

03

London Infrastructure | Connecting Opportunities

Travel times

tracking Crossrails
value uplift potential
By reducing travel times, Crossrail has the potential to increase the demand for homes
and the viability of further development in a number of locations across the capital

ravel time to central

locations is one of the
key drivers of value
for London property.
Crossrail will provide a
step-change in commute time for
certain locations, increasing both
the demand for homes and the
viability of development.
By opening up new sites and
improving access to outer boroughs,
the new line can play a significant
part in increasing Londons housing
numbers, particularly if these new
stations are accompanied by bold
plans for place improvement.
Our analysis reveals that the
areas immediately surrounding
the stations (500 metres) have not
consistently outperformed the wider
borough over the last five years
since construction started on the
line. The promise of a station alone
is clearly not enough to push up
house prices.
However, our map shows that
there is potential for further value
uplift in many areas along the
Crossrail line. Outer locations offer
the greatest value uplift potential but
the timescale is likely to be longer,
as there are additional barriers to
achieving the higher price levels. In
central locations value uplift is likely
to be driven by improved retail and
leisure amenities.
Where development has already
occurred, new build schemes have
achieved a significant premium to
existing stock, but one that can be
supported by the new travel time
and the place improvement brought
about by large-scale regeneration.
For example, in Woolwich at the
Royal Arsenal scheme, which is
near the station, the current average
asking price is 630 psf according
to Molior. Meanwhile, the average
asking price at the Glasshouse
Gardens in Stratford has reached
760 psf. n

04

Potential Crossrail value uplift

following travel time reduction
Very high
High
Medium
Low - uplift depends on other factors

West Drayton, Hayes &

Harlington, Southall
Average travel time reduction:
19 mins
Units with planning permission
within 500m of the station:
3,585 units (2,705 private)

Hanwell, West Ealing,

Ealing Broadway, Acton
Average travel time reduction:
20 mins
Units with planning permission
within 500m of the station:
2,367 units (1,481 private)

Heathrow

Source: Savills Research

FIGURE 2

A brief history of Crossrail

1941-48
First proposals
for cross-London
railway tunnels
Source: Savills Research

1974
Term Crossrail first
emerges in London Rail
Study Report

Autumn 2014

Crossrail will bring

an extra 1.5 million
people to within
45 minutes of
central London

Crossrail will transform

rail transport in
London, increasing its
capacity by 10%

The route runs from

Reading and Heathrow
in the west, to
Shenfield and Abbey
Wood in the east

It will link key

employment, leisure
and business districts;
Heathrow, West End,
the City, Docklands

Stratford, Maryland,
Forest Gate
Average travel time reduction:
8 mins
Units with planning permission
within 500m of the station:
14,937 units (11,954 private)

Manor Park, Ilford,

Seven Kings, Goodmayes,
Chadwell Heath
Average travel time reduction:
10 mins
Units with planning permission
within 500m of the station:
1,971 units (1,289 private)

Stratford

City

Canary Wharf

West End
London Bridge Quarter

Paddington, Tottenham Court Road, Bond Street, Farringdon

For central stations the travel time benefits of Crossrail are negligible.
However, the investment in public realm and new commercial developments
will hugely increase their attractiveness as employment, leisure and retail
destinations, which is likely to be reflected in residential property values.

1989-94
Liverpool Street to Paddington route
put forward and private Bill submitted
to Parliament. Bill rejected but route
safeguarded to add protection against
future competing schemes.

2001
Cross London Rail
Links set up by TfL
and DfT to promote
the scheme.

2005
Crossrail Bill
first put before
Parliament.

Woolwich, Abbey Wood

Average travel time reduction:
24 mins
Units with planning permission
within 500m of the station:
7,004 units (5,615 private)

2008 (July)
The Crossrail Act
2008 receives Royal
Assent and financing
commitments are made.

2009 (May)
Construction
starts

savills.co.uk/research

05

London Infrastructure | Connecting Opportunities

Placemaking

THE IMPORTANCE
OF PLACEMAKING
New communities require a mix
of employment, shops, schools
and services to thrive
Words: Katy Warrick
Twitter: @katywarrick

ur research has
shown that the
features homeowners
value most about
their home are not
necessarily associated with the
building itself, but more with the
environment in which it is located.
Factors such as neighbourhood,
safety, greenery and access
to amenities are cited as more
important than simply building
attractive buildings. These must
be created by focussing on the
relationship between individual
developments and the wider area or
in other words placemaking.
While the planning system often
requires some form of mixed use

development in large scale schemes,

placemaking is paramount in
regeneration schemes which cant
rely on the services and amenities of
established neighbourhoods.
Kings Cross is a clear success
story. Despite it only being part way
through the delivery period, it already
feels vibrant. Stratford has also been
transformed over the past decade.
The Olympics brought with it the
centre piece of the sports stadium,
certainty of delivery within a strict
deadline and significant investment in
infrastructure, retail and public realm
up front.
Its success is reflected in the high
demand for rental property at East
Village that has brought a critical

Placemaking is paramount in regeneration

schemes which cant rely on the amenities
and services of established neighbourhoods
Katy Warrick, Savills Research
FIGURE 3

The building blocks of regeneration

TRANSPORT LINKS
BUZZ

HOUSING

Quality public realm

A CENTRE PIECE
Source: Savills Research

06

EMPLOYMENT

RETAIL

Autumn 2014

mass of people to the area. The

addition of Crossrail is the icing on
the cake.
By comparison, the regeneration
of Paddington worked less well at
the beginning as a result of little early
investment in the wider environment.
Large blocks were delivered in
isolation with little design interaction
with the surrounding Georgian
townhouses. Installation of high
quality public realm and a greater mix
of uses only came in later phases.

Old Oak Common

With little in the area other than light

industry, there is a great opportunity
to give Old Oak Common the Kings
Cross treatment.
It has been proposed by TFL that
Old Oak Common station should
become a super-hub, with an
interchange between HS2, Crossrail
and the Overground. Savills believes
that this is a crucial element in the
improvement of the transport network,
and would have significant impact
on the scope of development and
potential for successful placemaking at
Old Oak Common.
The area, which has been proposed
as a new Opportunity Area, comprises
155 hectares of developable land,
much of which is within public
ownership, which should facilitate
delivery.
In Old Oak a vision for the future,
the Mayor argues that the area, with
its new transport interchange, would
have the capacity to deliver a potential
24,000 new homes and 55,000 jobs
over the next 30 years.
The Mayors vision also considers a
sports stadium, as an early phase of
development. Given that Queens Park
Rangers have recently announced
plans to relocate there, creating an
event space could be the key to
putting Old Oak Common on the
map by giving it an early identity. This
would create momentum and attract
other components of successful
placemaking.
Other uses will include education
(Imperial and University College are
looking to expand), an industrial
area, waste facilities, retail, schools,
healthcare and other community and
sports facilities required to support a
growing neighbourhood.

shopping, community and leisure

facilities. With property values
under 300 psf, most Londoners
should be able to afford to buy or
rent a home here.
However, significant transport
infrastructure must be built to support
the currently poorly connected
development. TFL is currently
consulting on the extension of the

Overground to Barking Riverside,

where a new station would be built.
We estimate that the resulting
reduction in travel time to main
employment centres combined with
place improvement could result in a
67% uplift in local property values
whilst still maintaining a significant
discount to prices at competitor
locations. n

CASE STUDY: KINGS CROSS

A revamped district built around a major transport hub
At the end of the last century, Kings Cross
was a 67 acre semi derelict, impenetrable and
partially contaminated urban piece of land. It
has become a major transport hub, including
six Underground lines, two mainline train
stations and a high speed rail line to Paris,
Brussels and Lille.

Kings Place was completed in 2008, a mixed

use development with leisure and office space
working side by side, incorporating a concert
hall, conference and event space, as well
as offices. Regent Quarter and St Pancras
Chambers were subsequently completed,
including residential, office space and a hotel.

The detailed planning process took eight

years. One of the catalysts for the project was
the scale of infrastructure investment at Kings
Cross and St Pancras that had to be delivered
to underwrite the UKs Olympic bid, which
was won in July 2005.

Attracting the University of the Arts early on

was key. The students brought the creative
tone and helped draw in Google which has
commissioned the firms largest office outside
its Googleplex headquarters in California.

The completion of HS1 in November 2007,

gave the project a further boost. Construction
began in 2008 and by the time the final works
are delivered in 2020, it will have taken 12
years to complete 55 buildings.

There are 1,700 homes planned for the area

and residential sales have been incredibly
strong. In the first phase ,The Arthouse
building, achieved c. 800 psf. The latest
phase, The Plimsoll Building, is currently
averaging 1,570 psf (Source: Molior).

Barking Riverside

Barking Riverside has planning

permission for up to 10,800 new
homes, as well as healthcare,

savills.co.uk/research

07

London Infrastructure | Connecting Opportunities

OUTLOOK
Raising the funds will require
innovative approaches. The strength of
the London property market and its acute
housing crisis is supporting arguments
for fiscal devolution to large cities.
Retaining property revenue streams such
as stamp duty, land tax and business
rates could make a significant difference
to London. Last year London provided
42% of the total 6.5bn receipts from
Stamp Duty Land Tax. Reform would
result in a shift away from ad hoc
financing for specific projects and provide
sustained investment for a full range of
future infrastructure.
London Mayoral CIL (Community
Infrastructure Levy) has contributed 94%
of the total 57 million raised by the tax
to date (see CIL Is It Delivering?). The
success of the London scheme is largely
the result of its uniquely straightforward
approach to CIL in which Londons 32
boroughs are charged one of three flat
rates (20, 35 or 50 per sq m). This has
allowed the burden of infrastructure to be

spread across all development. Yet despite

its success, it is anticipated to provide only
2% of the funding required for Crossrail.
Integrating infrastructure delivery
is key. Although this report did not have
the scope to cover the full range of
infrastructure improvements listed in the
Mayors first ever strategic infrastructure
plan, it is essential that plans for more
new homes go hand-in-hand with
improvements to the citys utilities,
sewerage, drainage, waste disposal,
recycling and flood defences.
The airport extension debate remains
one of the UKs most significant and
contentious infrastructure issues. The
current system cannot keep pace with
the level of aviation demand, which is set
to grow. Heathrow has been running at
98.5% capacity for over a decade due
to its physical constraints on growth.
Gatwick, Luton and London City are
all forecast to be full by 2030. After the
Airports Commission rejected The Mayors

four runway Thames estuary proposal in

September this year, three options remain:
a 3,500 metre third runway at Heathrow,
lengthening one of the existing runways
and a second runway at Gatwick.
Regional powerhouses beyond
London: One of the effects of the
Scottish Independence referendum
was to instigate debate about regional
devolution throughout the rest of the
country. As the election approaches,
George Osborne talks of plans for a
northern powerhouse, Ed Miliband
promises to create regional economic
powerhouses and Nick Clegg
has outlined his vision for greater
decentralisation in the Northern Futures
project. Many of these ideas are based
around the One North plan, developed
by key northern cities to boost transport
links between key centres and maximise
economic growth. We are expecting
to hear more about the Coalition
Governments plans for this in the
Autumn Statement.

Savills team
Research

Susan Emmett
UK Residential
020 3107 5460
[email protected]
Twitter: @saemmett

Nick Gregori
UK Residential
020 7409 5907
[email protected]

Chris Buckle
Development
Consultancy
020 7016 3881
[email protected]

London Research

Katy Warrick
London Residential
020 7016 3884
[email protected]
Twitter: @katywarrick

Emily Donovan
London Residential
020 7409 5903
[email protected]

Ed Green
London Residential
020 7409 5902
[email protected]

Development and Planning

Richard Rees
Head of Development
Services
020 7016 3726
[email protected]

08

Paul McGowan
London Development
& Regeneration
020 7016 3844
paulmcgowan@
savills.com

David Williams
Development
020 7409 8709
[email protected]

Jeremy Bates
Head of Office and
Industrial Agency
[email protected]
020 7409 8813

Katherine Norton
Development
[email protected]
020 7409 5926

Roger Hepher
Planning
07807 999 230
[email protected]