Are Royal Docks the jewel in London’s crown?

Ignored for more than three decades, a wind of change is sweeping over east London’s Royal Docks and the surrounding area with more than 8,000 new homes and 650,000 sq ft of commercial space being built – and plans for 4,000 more homes, further commercial space and other amenities in the works. Once a frenetic base for the cargo industry, the Royal Docks were closed to commercial shipping in 1981 as technology and the creation of containerised cargo put them out of use, causing vast unemployment. So what has attracted investors and developers with such enthusiasm to this previously unloved spot? The waterways of east London may not be bustling anymore, but other transport modes in the area are rapidly expanding. In addition to plans for new DLR trains to increase capacity, Crossrail is due to start operating out of Custom House station in 2021, meaning it will take less than 20 minutes to get into the West End. As Graham Stark, project director for Silvertown at Lendlease, points out, the new line will also get people to Heathrow in around 45mins, which, he says, was one of the draws of the Silvertown site for the firm and its partner Starwood Capital. He adds that access to Custom House station for pedestrians and cyclists will be one of the first things Lendlease addresses at Silvertown and Ballymore’s Royal Wharf scheme with the erection of a new bridge. Meanwhile, London City Airport, which saw 4.9m passengers move through it in 2018, is undertaking a £500m development programme to accommodate a further 2m passengers a year. Having the expanding airport, as well as Crossrail, on its doorstep was a critical factor for China-based ABP securing Royal Albert Dock as its first UK development.  “It is very important to have easy access to the airport for businesses,” says John Miu, chief operating officer at ABP. “I can be in Dublin in 55 minutes from here. Most people can’t even get to an airport in 55 minutes, so it will help bring international businesses into the area.” Public transport is also one of the factors that brought Ballymore and its Singaporean and Malaysian partners, Oxley International Holdings and Ecoworld, to this part of town. For John Mulryan, group managing director at Ballymore, the amount of public transport connectivity at Royal Docks makes it unique. Add to this the large undeveloped land banks and a waterside location and it presents a lot of opportunity for developers wanting to deliver large-scale regeneration projects.  Stark agrees, noting that 62 acres of already remediated brownfield land in London was too tempting to pass up for Lendlease. Click here to see larger version of map Development in the all-but-forgotten area has not been without its challenges, however. “As a new location there is a challenge for people to understand what we are offering,” admits Miu. ABP has brought in agents Savills, Cushman & Wakefield and Glenny to help deliver that understanding to the occupational market now that the first phase of the £1.7bn, 4.7m sq ft project is complete. For Mulryan, most of the hurdles are associated with new building regulations which, he says, “mean that delivering cost-effective housing in these areas is more challenging than it was five or six years ago”. He adds: “Some schemes are selling better than others, but in truth I think all schemes are selling worse than they were three to four years ago. “It’s no secret that the London market, particularly the off-plan market, is heavily reliant on investors and that the measures taken in terms of changes to taxation in housing have had a significant impact in terms of buy-to-let landlords and their appetite to invest. This has had an impact on most London projects, say in terms of under £2,000 per sq ft, and I think above that price point stamp duty changes equally have had a fairly significant impact. “There’s also an issue around affordability. Prices in some areas got a bit ahead of themselves and there’s a little bit of a correction required now. On some of our new projects we’re pricing at levels that are much more competitive than they would have been a few years ago and we’re hoping that that will inject a bit of pace back into the market.”  “It’s difficult at the moment,” says Mulryan. “The challenges around viability – where we’ve seen significant construction cost inflation over a number of years combined with the additional costs of higher levels of affordable housing – mean it’s not surprising that the delivery of housing in central London is slowing fairly dramatically. That’s a real challenge for the industry overall.” “It’s difficult at the moment. The challenges around viability mean it’s not surprising that the delivery of housing in central London is slowing fairly dramatically. That’s a real challenge for the industry overall.” – John Mulryan One of the other big challenges of starting a big regeneration project in a nearly empty part of London, according to Mulryan, is gaining critical mass as quickly as possible. “We’ve all seen projects in the past where someone has built 200 homes in the middle of nowhere and not a lot happens there for a long time,” he says. “So, over the past five or six years, developers working on big regeneration projects have been delivering really quickly. What that does is create a critical mass of people to help make a place.  “We all want to see cool retail and nice bars and restaurants and education use – schools and crêches – and all that stuff, but the truth of it is that if you don’t have enough people none of that works.” This is why Ballymore and Oxley have steamed ahead with delivering 3,385 new homes at Royal Wharf where more than 1,000 residents have now moved in.  “That’s now feeding through to us having much more success on the retail side. We’ve now got a school going in and a new pier being built down there. It’s a self-fulfilling philosophy – if you build it they will come,” Mulryan says. Future looks bright Despite these challenges the future looks bright for this part of east London with residents starting to populate Ballymore’s schemes at Royal Wharf and at London City Island, where the first business occupiers are settling in. This includes venture capital fund Pontaq, which is to establish its UK base at Royal Albert Dock, with plans to create a tech hub hosting UK and Indian technology firms. ABP says it is also currently fielding enquiries from around 60 companies about office space ranging between 1.2m sq ft and 1.8m q ft. For Miu, this interest is being generated because the scheme offers companies’ staff a waterside place to work that is easily accessible to most Londoners. In addition to that, of course, is its excellent connectivity to the rest of London and the world, and all “at a very affordable price that can be expected to be half that of the occupational costs in other London locations”.  Miu expects Royal Albert Dock to generate £5bn of investment into London. Meanwhile, restaurants, cafés and shops are opening up across Ballymore’s schemes and, at London City Island, galleries and creative workspace provider Arebyte is now in operation. They will soon be joined by the London Film School and the English National Ballet, which is likely to take up residence in its new, bespoke home at London City Island in September. Patrick Harrison, executive director at English National Ballet, says the company decided to relocate to east London from Knightsbridge as it needed more space but also wanted to be part of the vibrant arts scene in the area. He hopes the move will enable the company to create even richer work through partnerships with others in the area. The company also plans to hire out its new full-sized production studio to other dance and opera companies. Harrison adds that the wider regeneration of the Royal Docks is an “illustration of why we’re so confident in moving here as an art organisation”.  “In next five to 10 years, there will be even more opportunities for collaboration and that’s exciting as an arts organisation,” he says. Meanwhile, the success of Royal Wharf and London City Island, which are over 90% sold, and Goodluck Hope (next door to London City Island) which is 60% sold, despite being at an earlier stage of construction, means Ballymore is set on pursuing further developments in the area. “We’ve still got a fairly significant land bank that could deliver up to 5,000 new homes within the area, which we’re looking to bring through planning in the next few years,” Mulryan says. This includes its Deanston Wharf project directly to the east of Royal Wharf, which has planning for just over 800 units, of which 30% will be affordable, and where Ballymore is close to signing its Section 106 agreement. It will also be Ballymore’s first foray into the private rented sector and see the creation of a new platform to operate the homes with its partners. “It feels like it’s the right location,” Mulryan says. “The Royal Docks is at the right price point to make the private rented sector work, and for us it’s a new way to deliver these projects.” He adds: “London has been moving east for some time and east London can offer people incredible amenity along with good connections at a price that’s a little bit more attractive than other parts of London. We’ve always seen east London, particularly in this area around the Lea Valley and the Royal Docks, as an opportunity to offer value to homebuyers. “What these big regeneration projects are really doing is helping London to grow in a way we can be proud of in the future.” To send feedback, e-mail louise.dransfield@egi.co.uk or tweet @DransfieldL or @estatesgazette