Developing in the West End is becoming increasingly challenging as myriad factors come together to stack up to prevent investors pressing the green button, according to director of central London at the Crown Estate and chairman of the Westminster Property Association, James Cooksey.
Speaking at a panel discussion at EG’s London Development Summit at the British Museum this morning, Cooksey outlined how weakening tenant demand alongside high land values and political uncertainty were slowing the market down.
“In the West End there is limited supply, but demand is weak and if we are honest it has weakened over the past 18 months.
“The longer the debate over Brexit goes on, the more challenging it becomes.
“If businesses are on the cusp of making an investment decision, moving or staying put, understandably they are increasingly staying where they are and we are seeing landlords working harder to keep them staying put,” he said.
With trophy assets still achieving strong pricing, Cooksey said this actually made development harder as it was sustaining land values and subsequently meant developers had to take on even more risk.
“Delivering a development now is really challenging,” he said.
“Values have remained remarkably robust, which has propped up pricing that doesn’t acknowledge weaknesses in the occupier market.
“When you look at land it becomes increasingly difficult to work out a viable scheme.”
Despite this relative pessimism in the West End, Annie Hampson, chief planning officer and development director at the City of London Corporation, said she had seen no slowdown in activity or a lack of desire from developers.
“There is more being built out in any time since 2008. There is still a feeling there is a growing need for more offices in the City, but those occupiers are going to change. [The mood is] realistic but optimistic.
“There is no slowing still in interest in big schemes and conversions. There is now much more foreign investment and there is a view that although it is a risky market, it is better than many parts of the world,” she said.
Mayor of London Sadiq Khan is due to publish his draft London Plan later this month and Dominic Grace, Savills’ head of London residential development, said it was crucial that the detail of this was laid out correctly as a roadmap for development and growth for the capital.
“It is an opportunity to put everyone who counts feet to the fire to make sure it is match-fit for the market. There needs to be appropriate targets for us all to work towards,” he said.
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