Roundtable roundup: what's next for London's prime residential market?
Eaton Lane Marketing Suite
Celia Bacon reports on the topics of discussion at our lively roundtable event that looked at the challenges, changes and trends for this year in London's prime residential market. Many thanks to Tom Mann and Alex Graham from Savills, Caroline Edwards from Almacantar, Henry Lester from Redd Real Estate, Richard Petrik from Rhodium and Dean Clifford from Great Marlborough Estates.
In summary, the feeling is that it is a challenging market, however London is still attractive to buyers and hotels are booming. The interest rate rises towards the end of 2023 and cost rises throughout the year are potentially going to hinder some new developments, however some parts of the London market are proving resilient and the sector is performing well.
The energy and excitement that started at the beginning of 2021 after lockdown is still there and there is a visible supply pipeline that looks pretty good for at least a couple of years. Financing and debt are also a risk factor for future projects with landowners holding out and the pipeline stalling. There are still low levels of rental stock.
It’s important to continue those conversations across disciplines about current market challenges. Innovations through working together can help navigate some of the policy decisions that are affecting the market and help to find new opportunities. There is an element of realism whilst trying to innovate and conversely perhaps taking on a little more risk.
Differentiation
How to differentiate the product and services creates opportunity to stand apart from others. Having said that, what people are excited about is beautiful buildings, beautiful interior architecture and enormous spaces. Layouts tend to be similar so the elements around make the difference. Service charge is obviously one of many considerations, and it is the way that a building is designed which essentially defines a service charge. For example having an additional entrance with a person present can uplift concierge costs considerably.
Planning and opportunity
We are seeing the results of an underfunded planning system. It means the opportunities are with offices at the moment but this will adjust back to residential. In working out how planning policy can work for you, there are opportunities around grey areas in what is new, what is a conversion and what is a retrofit. Authorities are looking for ways to fund affordable housing and their estate regeneration programmes. Mixed-use has benefits as systems such as CCTV, heating and cooling and facilities can work across office, residential and hotel, which dovetails with the branded scheme, these are co-location critical.
Optimising is a challenge, particularly in relation to decisions on what is wanted in terms of number of units and unit size. Unit mix has changed in response to the cap maximum dwelling size within Westminster. With the London market, such developments might be carved up into small unit sizes which are selling, even those without views, because it is a lifestyle choice to live in central London. The question is how to cater to those wanting a larger unit size.
For planning teams, better coordination can make great investment opportunities; for example landowners, the London estates and industry bodies coming together to make great placemaking. This is what really pushes sales if community and complementary uses are provided across neighbouring sites.
Adapting existing buildings
When adapting existing building stock with deep plans, such as department stores, there are some very good examples in Europe where they have used clever design tricks. Creating views into what appears to be a courtyard area and creating that connection to something natural. Period properties with their larger room sizes are always attractive if you can squeeze in the amenities.
Some authorities have a retrofit only agenda and this can be a challenge. Everyone can get behind retrofit first as it is less destructive but perhaps the debate should be more balanced. There needs to be more debate around carbon emissions and data for certification. It creates more risk with planning in the UK, however there can be less risk in other countries. While planning is driving the adaptive re-use agenda, taxation rules are a significant barrier. Unless a client has specific targets due to altruistic policies / agenda, re-use and retrofit can be seen to not stack up given the risks and limitations.
Building Safety Act
The delayed publication of new building safety standards legislation and regulations is a challenge. There are so many questions around the consequences of it such as time and backlogs of gateways one and two. Currently, there are so many unknowns about how it's actually going to be implemented and how the building safety regulator will actually apply the requirements. This creates risk to program, procurement and cost and therefore caution for future projects.
Pool and gym at Chelsea Barracks
Amenities
With amenities, its about the experience; are you welcomed, are you offered a towel, these all need extra people. It’s the debate around how far you push the service charge, a gap in the service can be noticed, you need to deliver luxury and luxury costs. So service charges obviously are a big consideration. It’s important to provide the best service and not be half hearted, you've got to be confident in what you're delivering and say, this is the best service, this is super prime service and therefore this is the cost to do it properly.
Wellness amenities are the most well used. A gym and a pool is seen as an extension of the home and people like to feel as if it is a private pool. This becomes more important for smaller unit sizes. With one development, a Covid era booking system continued after the pandemic, allowing residents to choose quieter and therefore more private times to swim. A different approach to amenities is to share with hotels in the ever growing ‘branded residence’ market. Some purchasers prefer this as it ensures the amenities have more buzz and use, as well as increased staffing, but this needs to work for the development given the significant share of profits the hotel brand would seek.
The other side to wellness is air quality and this is also a driver for buyers, it’s moved on from just considering acoustics. An AirRated Airscore to track and provide indoor air quality certifications and grading can demonstrate quality to buyers.
Good design and creativity go a long way when fitting out a space; a smallish room can be transformed into an amazing play space for example. But, that then depends on whether the residents would use it. Flex spaces work well and so the play space or even a shared office area is not that much more expensive to do. People are generally back in the office but a range of say meetings rooms and booths with informal soft seating can be a self-service and low-cost area that is well used. It’s also about privacy, a neutral and interesting space for a business meeting that isn’t your home. Perhaps it has great natural light or landscaped views, an informal and open feel, great FF&E and artwork, something that adds to the unit space.
The key thing with amenity spaces is they are essential for sales, and then often they're not that well utilised. Some amenities can drive up the service charge because they're expensive to operate. Areas that bring people together can be more lively and therefore residents are happier to pay the charge, creating a positive feedback loop. The key thing is to know who your market is and see what is and isn’t available in the area. It’s about placemaking and collaborating with neighbours. Sometimes projects try to appeal to too many people.
Interiors and tech
When it comes to interior taste, we have to articulate it in much greater detail, does it have Instagram interest, should it be bold and memorable? Fundamentally, it has to appeal to buyer imagination and this means fully fitting out the space even though it is wrong for this to be then replaced. There have been many debates around whether to fit out or leave as shell and core. Any fit out needs to be a high-end product with all the elements that are expected as a minimum because Instagram has filtered into people's normal lives.
For technical equipment such as AV, the systems often change and sometimes buyers want what they are familiar with rather than learning a new system. Keeping up to date with technology improvements is expected and buyers can have completely different requirements. There’s a benefit to a building that can theoretically adapt to different use patterns, smart building solutions with easy user interface. The need for integrated AV/IT as basebuild is becoming less necessary as wireless improves and gives better flexibility to the end user while reducing space hungry wired systems.
Many thanks to the attendees:
Tom Mann from Savills is on the residential development consultancy team and has a focus on central London schemes providing technical support, peer reviews, training, advice and support.
Alex Graham, also from Savills runs one of the central London planning teams which has a focus principally on Kensington and Chelsea and Westminster boroughs.
Caroline Edwards is development director at Almacantar a property development and investment company behind the redevelopment of Centre Point at Tottenham Court Road and The Bryanston, Hyde Park.
Henry Lester is head of investment at Redd Real Estate who are a prime central London developer with live prime projects at 1 Palace Green and 6 Charles Street.
Richard Petrik from Rhodium works predominantly on super prime residential and mixed-use developments. Key projects include Regent's Crescent and currently a scheme behind 100 Piccadilly.
Dean Clifford is a founder of Great Marlborough Estates, the team behind the early development of Regent’s Crescent.
Celia Bacon from Studio PDP is a senior architect with experience working on many prime residential schemes, including recently on Chelsea Barracks and currently on Cambridge House Hotel.
Mel Perkins is a partner at Studio PDP person who gets involved with many listed building projects, solving the challenges they bring, currently working on 100 Piccadilly.
Iain McLellen from Studio PDP worked extensively on Regent’s Crescent and currently on Eaton Lane as well as providing technical support for the Cambridge House Hotel team.
Rasa Pravilone is a senior architect at Studio PDP working on the prime residential space at 100 Piccadilly.
Zoe Buchanan is project architectural designer at Studio PDP working on the prime residential space at 100 Piccadilly.
Bea Kay is project admin coordinator at Studio PDP providing support for the Cambridge House Hotel team.
Katherine Holman heads up marketing at Studio PDP and is interested in all the storytelling around architecture and design as well as steering the brand and working with business development.
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