CoStar Column: Why London buildings will keep on rising post-Brexit

By Christian Drage - Monday, February 13, 2017 15:13

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The uncertainty of the past year may have dragged markets down but it will not prevent London developers from continuing to reach for the sky, says Christian Drage, partner at Berwin Leighton Paisner.

2016 was a year of tumultuous events – Brexit and the fall out of political decisions in the US – which will continue to play a role for years to come. Predicting trends in the real estate market has become more difficult than ever.

Despite this, we can remain confident that London will continue growing, quite literally, up into the clouds. Given the history of undersupply and continuing appetite for London real estate, more high-rise buildings are expected to follow the raft of announced skyscrapers given the green-light at the end of last year. There will be many challenges along the way – impact on the surrounding environment, transport planning, infrastructure investment and design standards – all to be met by the right scheme in the right place and promoted in the right way.

However, London is still comparatively new to tall buildings compared to other capitals, such as New York and Tokyo, and there are real debates about how much the London skyline may need to be controlled. How smooth will the road ahead be for skyscraper projects? What could London learn from the experience of other cities?

London – the new vertical metropolis

London already boasts nearly 120 buildings over 100 metres high. Add to this some 70 proposed new schemes, and over 35 ‘tall’ projects currently under construction, and it cannot be denied that the skyline is undergoing a recognised shift in scale. The number of buildings with 20 plus storeys, which for many of the London boroughs is the tall building watermark, is significantly greater.

These figures are literally rising. The City recently approved further towers within its self-prescribed Eastern Cluster, including 1 Undershaft (73 storeys), and the Brookfield development at 1 Leadenhall (36 storeys). New skyscrapers are being proposed for the area to the south of Blackfriars Bridge, already dominated by the nearly completed 1 Blackfriars. Equally, tall residential-led projects in the Nine Elms Basin will be vying for attention against St George’s 50-storey Vauxhall Tower. Further out from the centre, there are tall building developments appearing at the Greenwich Peninsula, London City Island and Stratford to the east, Old Oak Common to the north-west, and at the Elephant and Castle and Croydon to the south.

Things are still looking up

Despite uncertainty following the UK’s vote to leave the EU, the signs of activity are good. Last October AXA announced construction would recommence at 22 Bishopsgate, which will become the tallest building in the City, after a hiatus over the summer. Deloitte’s latest Office Crane Survey found office construction in London up by 4% over the last six months of 2016 (immediately post-Brexit), with 8.8 million sqft of office space under construction in the City ,out of a total of 14.8m across Central London. Many of the City office developments are also announcing important post-June pre-lets, such as Axis Capital taking two floors in 52 Lime Street (the Scalpel) for intended occupation in 2018.

How is London coping with the shift in heights?

The apparent burst of high-rise buildings has provoked considerable debate across a spectrum of interests. The March 2016 Ipsos-MORI poll, carried out in the wake of Westminster approving the 30 storey Paddington Cube, revealed that 59% of Londoners felt there should be limits on the height of new buildings, and limits on the number of new buildings over 50 floors. Of those asked, 73% considered that Londoners should be consulted more over the number of new tall buildings. While Sadiq Khan has for the most part continued to show positive support for new tall building proposals, there is talk of a revised SPG for tall buildings as part of the review of the London Plan. Khan has made clear that as a result of their size and form, “their impact must be tested particularly rigorously through the planning process”. The effect on heritage and protected views continues to play heavy on the consideration of new proposals.

While construction is active, some projected completion dates are shifting. Are there signs of a slow down? It is too early to say and a pause or recalibration can be caused by many factors. A number of mixed-use tower schemes granted consent in the years preceding 2016 have been subject to amendments resulting from changes in investment teams and venue operator which has also delayed their construction. It will take more time to assess the effects of these trends and the extent to which they are linked to Brexit or other financial factors.

Conclusions

With 8 of the top 10 tallest buildings completed in 2016 located in China, it is not London, or indeed Europe or the US, who will lead in the skyscraper race if size and quantity are the only things that matter, nor is that likely to be the case any time soon. However, within the existing scale of London, there is both a growing demand, and a growing sense of acceptance for vertical densification, both for commercial and for residential developments. Making this happen in a place steeped in history and tradition is unlikely to run entirely smoothly, and this is exacerbated by the concerns associated with Brexit and shifts in economic and trading relationships across the globe. But while there are higher hurdles in the race to the skies, surely they are worth overcoming to achieve the returns likely to be seen in what remains one of the hottest real estate investment cities, if not the hottest, in the World.

London has never shied away from a challenge, nor has it overlooked the possibilities arising from changing circumstances. It is clear that in spite of – and indeed as a result of – shifting market conditions, there remains much scope for delivering world class developments, both to satisfy demand for quality space, and as part of international investment opportunities. May we continue to see the cranes soar.

kjefford@costar.co.uk

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