Crossrail, the £16bn east-to-west London rail line, is set to bring numerous benefits to the capital, but a new analysis from market researcher CACI shows that some developers could be paying more for the project than they can expect to reap in benefits from it.
Daniel Parr, associate partner at CACI, says: “As well as creating a focus for office and retail development schemes, the Crossrail project will have important implications for London office rents and South East residential property values, as commuter accessibility improves for many locations along the route.”
CACI’s analysis of how much accessibility in to and out of London will increase as a result of the massive infrastructure project shows that some areas not served by a new Crossrail station could lose out despite paying for it.
One example is Victoria, SW1, where Land Securities has consent for a major regeneration around the rail station. As part of its planning consent, the REIT had to stump up a large sum to help pay for Crossrail.
That sum was paid in the form of London mayor Boris Johnson’s Crossrail levy, which seeks to raise £300m from developers towards the cost of the rail project. It is charged at £19.80 per sq ft on new central London office space above a 5,382 sq ft threshold.
For LandSec, this had looked likely to mean a £20m bill for its 1.5m sq ft Victoria Transport Interchange scheme. But, after much negotiation with the mayor’s office, the figure was reduced to £7.6m and finally to £1.2m.
Parr says: “Victoria is not necessarily getting direct benefit from Crossrail, despite paying the levy.” He says that office values in Victoria could start to slide down the rankings as a result of Crossrail, rather than rise or maintain their position.
CACI says that this is because several other destinations across London will become much more accessible, while Victoria – with national rail, Tube, bus and coach links – is already well served.
Central London stations including Bond Street, Farringdon, Liverpool Street, Paddington and Tottenham Court Road will all benefit from a 50%-plus increase in the number of affluent commuters that will be within 30 minutes’ travel time.
CACI believes that increased accessibility for this layer of society could have an effect on office occupancy, as company chief executives are likely to decide to locate new headquarters in areas that are easily commutable for themselves and their peers.
This could mean a particular boost for Paddington, where developers including Development Securities are trying to fill hundreds of thousands of square feet of office space.
According to CACI, Paddington Waterside will see a 73% increase in the number of affluent people living within a 30-minute commute of the area, the effects of which are likely to include enhanced competition for space and rising rents.
Bond Street, where space is sparse and rents are already high, will also benefit from a 56% increase in the number of affuent commuters within 30 minutes of the area.
But for LandSec and other developers in areas affected by the levy but not on the Crossrail route, benefits from their developments will have to be secured in the traditional manner – through great buildings and strong marketing.
samantha.mcclary@estatesgazette.com
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