Oliver Gibson, Director of Development and Investment at W A Ellis, comments:
"While the Olympics has compounded the seasonal reduction in sales transactions, the development market is booming in Prime Central London. Numerous prime development schemes are currently under construction, with significant stock due to hit the market over the next few years. This is a real change that could redress the supply/demand issue for top-end residential property.Focusing on schemes of 10 units or more, during 2010 in Kensington and Chelsea, construction completions totalled a mere 12 units, with 704 new applications.
Moving to 2011, completions rose to 50, with 1,737 new applications - the Borough's highest application pipeline for more than a decade. This shift is largely down to Capital & Counties' Earl's Court scheme, but there are numerous exclusive schemes in the pipeline. For example, following great success at NEO Bankside, Native Land and Grosvenor are creating 69 luxury properties at Holland Park School, while Lancer's De Vere Gardens scheme comprises 54 private units, due for launch in late 2013. Although final pricing is yet to be set at each scheme, it is likely that they will be asking in excess of £2,500 per sq ft.
It is interesting to note that the majority of units within these exclusive schemes will be asking in excess of £5 million. Meanwhile, according to Lonres, there have been just 27 sales achieving in excess of £5 million and £2,500 per sq ft during 2012 (to date), following a mere 29 in 2011 and 20 in 2010.If we assume a cautious construction timetable for the next three years, taking the schemes already mentioned into account, a plethora of supply is due to come to the market. At one scheme alone, Henry Moore Court, in Manresa Road, Carlyle Group will be providing 17 units priced in excess of £5 million, with three already sold off-plan and due for completion in the next 9 months.
Oliver continued:
"Meanwhile in the Westminster pipeline is Chelsea Barracks, with 325 private units alone. This is the largest scheme, followed by 237 private units being constructed by Exemplar, Aviva and Kaupthing at Fitzroy Place, the former Middlesex Hospital. In light of this, the question is, "is the historical supply-demand mismatch of prime stock set to swing from under to over-supply?" We believe not, notably for developments in the best locations and those finished to the highest level of specification. Smaller boutique schemes are likely to be the key to this issue.
One of these boutique schemes is St James's Gateway, on Jermyn Street. We have been acting as development consultants on this mixed use project for The Crown Estate and Joint Venture partner the Healthcare of Ontario Pension Plan. The Gateway scheme marks the start of The Crown's regeneration of St James's, with St James's Market soon to follow comprising 300,000 sq ft of mixed use space. Managers Stanhope plc are working towards practical completion of the Gateway scheme in spring 2013, and we are eagerly looking forward to selling and letting the 16 luxury units.
In spring 2013, we will also be launching another development at Picton Place, on behalf of mixed use developers Great Portland Estates. Having acted as development consultants, we are confident that the 11 units including parking will be in high demand, with long term investors also having the option of purchasing a rare Freehold investment building."
Lettings:
Lucy Morton, senior partner and head of lettings at W A Ellis, comments:
"Despite the talk of the Olympics dampening the market, our enquiry levels prior to the start of the Games were, if anything, up on this time last year. We believe that the increase was because people were rushing to secure lettings before the opening ceremony. Some savvy tenants are now looking to secure a property whilst the Olympics are on, believing that there is less competition in the market place.
This may be true in some cases, but not in the family homes market - we have seen bidding wars due to the ongoing shortage of good family homes to rent. A five bedroom property in Knightsbridge attracted competitive bidding from three parties in its first day of coming on to the market and has been let close to its asking price of £2,950 per week. We also saw competitive bidding on a two bedroom flat in Cadogan Square, as well as on a four bedroom flat in Pont Street.
The relocation agents are still keeping busy with their enquiries at the mid to upper levels of the market, whilst the majority of internet enquiries are for one and two bedroom apartments as students start to dominate the summer season. August is traditionally a busy month for lettings as students and families secure their properties for the start of the academic year. We strongly believe that the last two weeks, post Games, will be exceptionally busy."
