Google's Adaptive Reuse, London's Housing Taskforce, Countryside Trend - 15th Aug Property Bulletin

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Real Estate Developer Seeks Delay for Affordable Housing Units: Leopard UK Kensington Propco Limited, a West London developer, has approached the Kensington and Chelsea Council to postpone constructing five affordable housing units within a luxury retirement village project. Escalating inflation and increased costs of building materials have led to financial challenges for the project, prompting the developer to propose a phased approach to construction. The proposal includes building a community hall and green space first, with the construction of luxury retirement homes in a later phase. The council is set to review the application, considering potential impacts on the community and the development's revised timeline.

Google's Shift to Adaptive Reuse in Real Estate Strategy: Google has shifted its real estate strategy from constructing new headquarters to repurposing existing structures. Focusing on sustainability, Google aims to adaptively reuse notable buildings to create unique office spaces that align with its environmental and corporate values. This approach not only reduces environmental impact but also serves as a marketing tool to promote Google's commitment to responsible development and enhance its brand reputation.

Build to Rent's Evolution Beyond Housing: Build to Rent (BTR) is evolving to offer more than just housing, as developers shift towards community-oriented designs. BTR suburban communities prioritize family homes outside urban areas, emphasizing outdoor spaces over indoor amenities. This approach aligns with the changing work landscape post-pandemic, catering to evolving employee requirements. Collaboration with local authorities enables BTR to deliver housing, social care, education, and more, while addressing housing challenges and providing a variety of community benefits.

London Mayor Addresses Housing Slowdown: London Mayor Sadiq Khan reconvenes the London Housing Delivery Taskforce to tackle the growing housing crisis caused by rising interest rates and building costs. While the Mayor has overseen the creation of affordable homes, concerns about government inaction hindering further progress arise. A decline in housebuilding is anticipated, prompting the Mayor to seek additional funding for affordable housing delivery and revive the housing market. City Hall's renegotiated Affordable Homes Programme aims to prevent project viability issues in the face of increasing costs.

Londoners Seek Countryside Residences Amidst Mortgage Cost Rise: Rising mortgage rates have driven Londoners to relocate to the countryside in search of more affordable homes, fresh air, and community spirit. First-time buyers are significantly impacted, with a record number purchasing homes outside the city due to affordability concerns. This exodus gains momentum as soaring mortgage costs constrain budgets, highlighting the allure of affordable homes beyond the capital. The trend towards smaller, more affordable homes is also observed, influencing both location and property type choices.

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Transcript

15th August 2023 Property Bulletin 

A real estate developer operating in West London, specifically Leopard UK Kensington Propco Limited, has formally approached the local Kensington and Chelsea Council with a request to delay the construction of five affordable housing units that were initially planned as part of a larger luxury retirement village project. This development, often colloquially referred to as the "caviar care" retirement village due to its upscale nature, has been in the planning stages for several years.

The developer's primary reason for seeking a delay in the construction of the affordable homes stems from financial challenges brought about by escalating inflation rates. Inflation has significantly increased the cost of building materials and other related expenses, rendering the initial financial projections for the project insufficient to carry out all planned aspects of the development at this time.

The developer's proposal to the council outlines a revised plan for the project's execution. It suggests dividing the development process into two distinct phases. During the first phase, the developer aims to construct a community hall and establish a green space on the property. This approach would allow them to spread out the financial burden of the project over time, potentially attracting additional investment in the meantime. The second phase of the project would involve the construction of the luxury retirement homes and other facilities.

As part of this revised plan, the developer is requesting the postponement of its commitment to construct the affordable housing units and to pay a significant portion of the Community Infrastructure Levy (CIL) until the second phase of construction. The Community Infrastructure Levy is a charge levied on new developments to help fund infrastructure improvements within the local area.

Local residents have expressed concerns about the potential impact of the proposed changes. They fear extended construction timelines, increased traffic congestion, and disruptions to the neighborhood due to ongoing building activities. Some residents have raised objections to the altered plan, particularly regarding traffic management and potential safety risks associated with increased vehicle movement.

The Kensington and Chelsea Council is set to review the developer's application during an upcoming planning committee meeting scheduled for August 15. The council's report on the matter suggests that proceeding with the construction of the community hall as a separate initial phase could align with land use regulations pertaining to social and community purposes. The council's decision will determine whether the proposed changes are accepted and how the project will proceed.

Google, the tech giant, has redirected its real estate strategy towards adaptive reuse of existing structures, veering away from constructing new headquarters. Rather than building modern campuses, Google is now channeling its real estate investments into repurposing notable and intriguing buildings. This strategy is in line with Google's sustainability objectives and its commitment to environmental, social, and corporate governance (ESG) values.

One striking example of this approach is the transformation of an airplane hangar in Los Angeles, originally built by Howard Hughes for the Spruce Goose. Acquired by Google in the 2010s, the hangar has been converted into a 450,000-square-foot office complex. This project preserves historical industrial architecture while providing Google with an exceptional workspace.

Another instance involves a research and development facility from the 1960s in Sunnyvale, California. Previously utilized by an early mainframe computer manufacturer, Google is reimagining this building into a 250,000-square-foot office space. This move not only rejuvenates existing structures but also lessens the environmental impact that new constructions would generate.

This shift in strategy reflects both sustainability goals and the changing work landscape in the post-pandemic period. As hybrid work models become more prevalent, the need for large centralized campuses might dwindle. Through repurposing existing buildings, Google can create versatile and adaptable work environments that cater to evolving employee requirements.

Beyond its environmental benefits, Google's emphasis on adaptive reuse serves as a marketing tool. By revitalizing prominent buildings and neighborhood projects, Google underscores its dedication to sustainability and ethical development. This not only enhances Google's brand reputation but also inspires other companies to explore similar strategies for their own real estate undertakings.

The advantages of adaptive reuse extend beyond ecological considerations. By repurposing existing structures, Google taps into the distinctive character and history of these edifices, adding authenticity and allure to their office spaces. This contributes to a more immersive and motivating work atmosphere for its employees.

In essence, Google's pivot towards adaptive reuse within its real estate strategy is a shrewd and sustainable decision. By repurposing notable and captivating structures, Google crafts inspiring workplaces while lessening its environmental footprint. This aligns seamlessly with Google's sustainability objectives and functions as a vehicle for promoting the company's commitment to responsible development. As the hybrid work era evolves, adaptive reuse offers a versatile and responsive solution for accommodating the changing needs of the workforce.

Exploring Build to Rent's Community Enrichment Potential

Andy Jones, Group Director at LRG for Corporate & Build to Rent, delves into the realm of Build to Rent and its capacity to deliver more than just housing.

Build to Rent (BTR) has evolved beyond traditional housing. Andy Jones, Group Director of Corporate & Build to Rent at LRG, discusses the rise of BTR suburban communities and their potential to provide community-oriented benefits.

BTR, alongside private and affordable housing, falls under the C3 Use Class. However, innovators in property development question whether BTR should follow the same rules as traditional housing.

The BTR sector is booming, with a 15% year on year growth according to the British Property Federation. The focus is shifting from London to regional growth, which outpaces the capital at 20% compared to 7%.

Emerging BTR suburban communities offer family homes outside urban areas, maintaining the community aspect of BTR. These communities prioritize outdoor family spaces over indoor amenities.

BTR's core values, like high service standards and sustainability, persist in this new format.

Developers are shifting from purely residential to integrated, community-oriented designs, accelerated by the pandemic's emphasis on community and the need for accessible facilities.

BTR's potential reaches beyond housing. LRG clients are embracing community hubs that offer a variety of amenities under one roof.

BTR suburban communities, with their diverse housing, community focus, and services, are crucial for equitable development and addressing housing challenges.

The question arises: How much affordable housing should BTR include? Currently, only 6% of BTR units are affordable, often due to logistical challenges.

Policy for BTR is sparse, and its potential was not fully addressed in recent policy revisions.

Despite BTR's growth, many local planning authorities lack established policies for it. As BTR evolves, policies will likely develop.

BTR suburban communities cater to diverse demographics, addressing changing needs and offering multi-generational living.

Collaboration with local authorities enables BTR to deliver housing, social care, education, and more. Cross-subsidization can lead to tailored schemes that meet local needs.

BTR's scope for community benefits is vast. While affordable housing is important, the flexible BTR model can offer a range of community advantages that cater to local needs.

London Mayor Initiates Housing Taskforce Amidst Warning of Housing Slowdown

As the UK's housing sector faces multiple pressures, London Mayor Sadiq Khan has reconvened the London Housing Delivery Taskforce to address the growing housing crisis across London and the country.

While the Mayor has overseen a record number of affordable homes, including council homes, he raises concerns about Government inaction obstructing further progress in London.

Experts predict a substantial decline in housebuilding due to rising interest rates and building cost inflation. City Hall's data reflects this trend, showing a 41% drop in major planning applications referred to the Mayor compared to the previous year.

Costs for construction materials have surged, with a 33% increase since the beginning of 2021 and 40% since 2020. The Home Builders Federation even predicts a drop in housebuilding levels to the lowest since World War II.

In response, Sadiq Khan, along with key figures in the sector, has reconvened the London Housing Delivery Taskforce to ensure continued affordable housing construction at the required pace and scale. The Mayor has also written to the Secretary of State for Housing, Michael Gove, requesting an additional £2.2 billion in funding to bolster affordable housing delivery and revive the housing market.

City Hall has renegotiated its Affordable Homes Programme 2021-26 to prevent project viability issues, despite rising costs. The short-term proposal is for £2.2 billion to enhance affordable housing delivery, and in the long term, Sadiq Khan advocates for a funding settlement assessed at £4.4 billion annually.

Sadiq Khan emphasizes the urgent need for Government investment, stating that inaction threatens to halt housing development and undo the progress made in London. He calls for bold action to prevent a housing crisis from further escalating.

Londoners Flock to Countryside as Rising Mortgage Costs Drive Outmigration

August 11, 2023

Escaping the city has long been a trend for Londoners seeking more space, fresh air, and community spirit. This exodus has gained momentum as soaring mortgage rates have constrained buyers' budgets, pushing them to consider homes outside the capital.

Hamptons estate agents reveal that during the first half of this year, 7.7% of all buyers outside London were from the capital, surpassing the 6.9% average between 2015 and 2019. This indicates a shift from moving due to want to moving due to need, primarily triggered by higher mortgage rates.

First-time buyers have been especially affected, constituting a record 30% of Londoners buying homes outside the city in the last six months, up from 27% last year and double the figure from a decade ago. The allure of affordability is evident, with a first-time buyer potentially saving £8,656 annually on mortgage payments with a 15% deposit outside the M25.

Interestingly, 18% of those leaving London this year purchased their new homes without a mortgage, an increase from 14% in 2020. Affordability concerns are influencing both location and property type. The average price of a home bought by a Londoner outside the city during the first half of this year was £429,800, £60,000 lower than in 2022. Moreover, 37% of London leavers opted for one or two-bedroom homes, up from 33% last year.

The trend toward smaller, more affordable homes is supported by Zoopla's findings, which highlight a preference for lower-value homes or a delay in moving altogether. Sales of larger four-bedroom family homes have dropped significantly, while smaller homes and flats have seen a milder decline.

Aneisha Beveridge, Head of Research at Hamptons, explains that higher mortgage rates have redirected London outmigration, making affordability a crucial factor. If the current pace continues, Hamptons projects that nearly 54,000 Londoners could relocate to purchase homes in 2023. The prospect of prolonged higher mortgage rates could sustain this trend.

Beveridge also notes that households that purchased homes during London's market peak between 2014-2016 might be considering moves in the coming years, especially as property prices in parts of the city are lower today than when they bought. This situation could push more individuals to seek more affordable options outside the city, potentially further fueling the outmigration trend.

The Role of Multiple Dwellings Relief (MDR) in Affordable Housing Solutions

Multiple Dwellings Relief (MDR) is a financial mechanism aimed at reducing Stamp Duty Land Tax (SDLT) on the purchase of multiple dwellings, encouraging affordable housing development. MDR stimulates construction, boosts job creation, and increases the supply of affordable homes. However, critics argue that it can be misused by wealthy individuals. MDR's impact depends on proper government regulation and targeting to maintain its positive influence on affordable housing solutions. Despite controversies, MDR remains a crucial tool in addressing the housing crisis and promoting homeownership.