Interesting article in propertyweek about the lack of space for offices in CW & the surrounding areas. It also shows how quickly residential space is snapped up even before its built. Very encouraging.
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Who bought the Dogs out?
Residential land prices are soaring on the Isle of Dogs, and commercial schemes are about to be developed.
26.01.2007
By Christine Eade
Docklands estate agents are forced to admit that their shop windows are bare. When questioned by fellow agent Hurford Salvi Carr they disclosed that by the end of last year, they had fewer than 10 homes at any one time to sell – half the number they had offered at the beginning of the year.
The buyers do not resemble brochure pictures of smug-looking people who sip Martinis on the balconies of their dockside apartments. Instead, they are middlemen who help to finance the development process by putting down deposits on an entire block and providing finance that goes towards finishing the development.
‘There is a great shortage of property,’ says Stephen Hurford, a director of Hurford Salvi Carr. ‘What we are finding is more and more buildings are sold off plan to wholesalers who leak them back on to the market. They break the flats up into little groups. If they buy 300 flats, they will sell them to six syndicates who will take 50 flats each, and then they will be sold singly on the open market.’
One of the best examples of sales to middlemen is Oracle Homes’ Indescon Court, where work will begin next month on the first phase of 360 flats.
Oracle’s regional director, Scott Hammond, reveals that all the flats have now been presold in three bulk deals ranging from 50 to 80 flats each to overseas – predominantly Irish – investors, who will sell individual flats to investors in their home countries. Hammond says: ‘There has been substantial growth, and we are not able to get the product quick enough.’
Only against this background of frenzied activity does the price of residential land on the Isle of Dogs make sense (see graph). The amount being sold seems to indicate that the area south of Canary Wharf, which was once a secondary office location, is about to become home to a cluster of residential skyscrapers.
Oracle paid Sir Robert Ogden, an early Docklands investor, £62.25m for the 4.4 acre (1.8 ha) industrial site on the corner of Millharbour and Mastmaker Road at the beginning of last year, only to be offered £80m for the site by a housing association.
Oracle, however, was not tempted, as it was in negotiation with Tower Hamlets Council to change the planning consent on the second phase of the site from 490,000 sq ft (45,522 sq m) of offices to 490 homes.
In July, outline permission was granted and Oracle’s refusal to sell was vindicated. As Hammond explains: ‘There was no interest in an office prelet and without that the banks would have had difficulty in financing offices. But by changing the planning consent, the value was crystallised. I would say the value is now between £80m to £85m for housing.’
Change of plan
Oracle and its partners carried out four such deals where a change of planning consent was needed last year on the Isle of Dogs (see table). Together they demonstrate that land values stand at £21m/acre (£51.45/ha).
Part of the reason for the boom in residential land prices is that skyscrapers will replace the single-storey buildings. ‘We have had approaches to buy sites that were developed in the 1980s when Docklands was an Enterprise Zone, when developments were only four or five storeys,’ says Hammond. ‘Now we can redevelop them as 20, 30 or 40 storeys. There are still significant sites available.’
Meanwhile those who have lived on the Isle of Dogs for generations post their frustration on websites, pleading for no more flats until there is a commensurate provision of services.
Hammond rejects the criticism. ‘We have deliberately gone after sites where there is also open space available,’ he says.
There will be more of the same in the Isle of Dogs. Ballymore Properties has now demolished the London Arena, the ice hockey and pop concert venue in Crossharbour that closed nearly five years ago, and will replace it with a 43-storey block of flats. Ballymore’s Pan Peninsula, a scheme comprising a pair of 50- and 40-storey towers at 1 Millharbour, is 85% presold, even though no one is due to move in until next year.
Rupert Cherryman, who heads Docklands property consultancy Cherryman and who acted for Ballymore when it bought the arena and Peninsula sites, observes: ‘There is 4m sq ft around the Millennium Quarter [Isle of Dogs] with planning consent for commercial development, but only 10% is actually being proposed.’
He predicts that more consents will be renegotiated from commercial to residential.
Secondary land
The bonanza has led to a secondary residential land market. Ballymore has bought old Victorian backstreet engineering sites like Cuba Street and Byng Street on the Isle of Dogs as sites for social housing. The result is that its big developments will be almost entirely free of poor people.
In return for allowing social housing off site, Tower Hamlets Council will demand that Ballymore provide 50%instead of its standard 35% of social housing. Oracle prefers to incorporate social housing.
At Pan Peninsula, which is almost free of social housing, the price of a 350 sq ft (32 sq m) studio has risen from £230,000 at its 2005 launch to £303,000, while the penthouses are being launched today at £10m.
Ballymore is also about to begin work on site on 500,000 sq ft (46,450 sq m) of offices at Arrowhead Quay on the north side of Marsh Wall, even though it needs Tower Hamlets’ consent for minor design changes.
Rod Parker, GVA Grimley’s Docklands partner, has just compiled a list of development sites within 500 yards of Canary Wharf Tube station, with consent for commercial development (see table, right). He points out that until construction of Wood Wharf, the next development phase at Canary Wharf, begins, Canary Wharf is running out of space. The hinterland, however, is ready for development.
He cites the example of the boarded-up development site of London Millharbour, in the shadow of Pan Peninsula. Pembroke, a subsidiary of US fund Fidelity, has consent for offices, but many Docklands agents predict it will be developed as residential, like all the building sites that surround it.
Parker rejects this. ‘Fidelity renewed its planning consent six or seven years ago,’ he says, ‘and the site is going to be for offices. There has been too great an emphasis on residential. The pendulum is going to swing back to offices because of the increased value.’
He points out that Fidelity paid £11.5m for the 2 acre (8 ha) site seven years ago and can therefore keep its power dry. He estimates that an office development on the site could command rents of up to £33/sq ft (£355.21/sq m).
Bob Ashton at Cherryman, also sees the need for new offices on the Isle of Dogs. ‘Last year, there was 150,000 sq ft available in Exchange Tower [Hammerson’s office development between Limeharbour and Millwall Inner Dock], but we let three floors to Barclays bank as part of their expansion in Harbour Exchange.’
Ashton says that rents had been static at £23.50/sq ft (£252.95/sq m) from 2002 to 2003, having risen to £40/sq ft (£430.56/sq m) in 2001. But last year’s lettings showed an increase to £27.50/sq ft (£296/sq m).
If office rents and house prices continue their upward climb, the battle will be on for the future shape of the skyline of the Isle of Dogs.
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Who bought the Dogs out?
Residential land prices are soaring on the Isle of Dogs, and commercial schemes are about to be developed.
26.01.2007
By Christine Eade
Docklands estate agents are forced to admit that their shop windows are bare. When questioned by fellow agent Hurford Salvi Carr they disclosed that by the end of last year, they had fewer than 10 homes at any one time to sell – half the number they had offered at the beginning of the year.
The buyers do not resemble brochure pictures of smug-looking people who sip Martinis on the balconies of their dockside apartments. Instead, they are middlemen who help to finance the development process by putting down deposits on an entire block and providing finance that goes towards finishing the development.
‘There is a great shortage of property,’ says Stephen Hurford, a director of Hurford Salvi Carr. ‘What we are finding is more and more buildings are sold off plan to wholesalers who leak them back on to the market. They break the flats up into little groups. If they buy 300 flats, they will sell them to six syndicates who will take 50 flats each, and then they will be sold singly on the open market.’
One of the best examples of sales to middlemen is Oracle Homes’ Indescon Court, where work will begin next month on the first phase of 360 flats.
Oracle’s regional director, Scott Hammond, reveals that all the flats have now been presold in three bulk deals ranging from 50 to 80 flats each to overseas – predominantly Irish – investors, who will sell individual flats to investors in their home countries. Hammond says: ‘There has been substantial growth, and we are not able to get the product quick enough.’
Only against this background of frenzied activity does the price of residential land on the Isle of Dogs make sense (see graph). The amount being sold seems to indicate that the area south of Canary Wharf, which was once a secondary office location, is about to become home to a cluster of residential skyscrapers.
Oracle paid Sir Robert Ogden, an early Docklands investor, £62.25m for the 4.4 acre (1.8 ha) industrial site on the corner of Millharbour and Mastmaker Road at the beginning of last year, only to be offered £80m for the site by a housing association.
Oracle, however, was not tempted, as it was in negotiation with Tower Hamlets Council to change the planning consent on the second phase of the site from 490,000 sq ft (45,522 sq m) of offices to 490 homes.
In July, outline permission was granted and Oracle’s refusal to sell was vindicated. As Hammond explains: ‘There was no interest in an office prelet and without that the banks would have had difficulty in financing offices. But by changing the planning consent, the value was crystallised. I would say the value is now between £80m to £85m for housing.’
Change of plan
Oracle and its partners carried out four such deals where a change of planning consent was needed last year on the Isle of Dogs (see table). Together they demonstrate that land values stand at £21m/acre (£51.45/ha).
Part of the reason for the boom in residential land prices is that skyscrapers will replace the single-storey buildings. ‘We have had approaches to buy sites that were developed in the 1980s when Docklands was an Enterprise Zone, when developments were only four or five storeys,’ says Hammond. ‘Now we can redevelop them as 20, 30 or 40 storeys. There are still significant sites available.’
Meanwhile those who have lived on the Isle of Dogs for generations post their frustration on websites, pleading for no more flats until there is a commensurate provision of services.
Hammond rejects the criticism. ‘We have deliberately gone after sites where there is also open space available,’ he says.
There will be more of the same in the Isle of Dogs. Ballymore Properties has now demolished the London Arena, the ice hockey and pop concert venue in Crossharbour that closed nearly five years ago, and will replace it with a 43-storey block of flats. Ballymore’s Pan Peninsula, a scheme comprising a pair of 50- and 40-storey towers at 1 Millharbour, is 85% presold, even though no one is due to move in until next year.
Rupert Cherryman, who heads Docklands property consultancy Cherryman and who acted for Ballymore when it bought the arena and Peninsula sites, observes: ‘There is 4m sq ft around the Millennium Quarter [Isle of Dogs] with planning consent for commercial development, but only 10% is actually being proposed.’
He predicts that more consents will be renegotiated from commercial to residential.
Secondary land
The bonanza has led to a secondary residential land market. Ballymore has bought old Victorian backstreet engineering sites like Cuba Street and Byng Street on the Isle of Dogs as sites for social housing. The result is that its big developments will be almost entirely free of poor people.
In return for allowing social housing off site, Tower Hamlets Council will demand that Ballymore provide 50%instead of its standard 35% of social housing. Oracle prefers to incorporate social housing.
At Pan Peninsula, which is almost free of social housing, the price of a 350 sq ft (32 sq m) studio has risen from £230,000 at its 2005 launch to £303,000, while the penthouses are being launched today at £10m.
Ballymore is also about to begin work on site on 500,000 sq ft (46,450 sq m) of offices at Arrowhead Quay on the north side of Marsh Wall, even though it needs Tower Hamlets’ consent for minor design changes.
Rod Parker, GVA Grimley’s Docklands partner, has just compiled a list of development sites within 500 yards of Canary Wharf Tube station, with consent for commercial development (see table, right). He points out that until construction of Wood Wharf, the next development phase at Canary Wharf, begins, Canary Wharf is running out of space. The hinterland, however, is ready for development.
He cites the example of the boarded-up development site of London Millharbour, in the shadow of Pan Peninsula. Pembroke, a subsidiary of US fund Fidelity, has consent for offices, but many Docklands agents predict it will be developed as residential, like all the building sites that surround it.
Parker rejects this. ‘Fidelity renewed its planning consent six or seven years ago,’ he says, ‘and the site is going to be for offices. There has been too great an emphasis on residential. The pendulum is going to swing back to offices because of the increased value.’
He points out that Fidelity paid £11.5m for the 2 acre (8 ha) site seven years ago and can therefore keep its power dry. He estimates that an office development on the site could command rents of up to £33/sq ft (£355.21/sq m).
Bob Ashton at Cherryman, also sees the need for new offices on the Isle of Dogs. ‘Last year, there was 150,000 sq ft available in Exchange Tower [Hammerson’s office development between Limeharbour and Millwall Inner Dock], but we let three floors to Barclays bank as part of their expansion in Harbour Exchange.’
Ashton says that rents had been static at £23.50/sq ft (£252.95/sq m) from 2002 to 2003, having risen to £40/sq ft (£430.56/sq m) in 2001. But last year’s lettings showed an increase to £27.50/sq ft (£296/sq m).
If office rents and house prices continue their upward climb, the battle will be on for the future shape of the skyline of the Isle of Dogs.
