How Crossrail has transformed London real estate

As Crossrail finally opens, real estate players who made bets along the length of the line over the years are at last gearing up for rising rents, fresh tenant demand and a lift to capital values. It has been a long time coming. Last October, Crossrail chief executive Mark Wild held a private briefing for a few dozen property bosses in the foyer of an office building directly above Farringdon station. Nervous excitement rippled through the room as Wild told the likes of Shaftesbury’s Brian Bickell, Brookfield’s Dan Scanlon and economist Tony Travers that the Elizabeth Line would finally open in the summer of 2022. But after more than three years of delays, some remained unconvinced. On the way out one senior executive muttered: “We’ve heard that one before.” But Wild stayed true to his word. The Queen herself made a surprise appearance at Paddington station last week to cut the ribbon on her eponymous Tube line. The public opening takes place today. There are caveats, of course – Bond Street station still isn’t open; the service won’t run on Sundays; and on other days it will only run at about half its potential capacity.  However, the delays will not worry London real estate players, who have been gradually reshaping London’s built environment based on the Elizabeth Line blueprints for more than a decade. Now, as Crossrail finally becomes a reality, EG looks at how things have changed – and what might be yet to come. The “announcement effect” From the moment Crossrail was approved in 2007 by then-prime minister Gordon Brown, it became a tag with which to market the areas around its most significant central stations, and that has intensified with each year. Office rents in Farringdon, for example, have grown by 7.9% in the past five years against a London average of 2.9%, according to Savills research.  New buildings have sprung up around those stations too, dramatically changing the skyline. In Farringdon, these include Helical’s 88,600 sq ft Kaleidoscope building and HB Reavis’ 145,000 sq ft Bloom, where Wild spoke in October.  Elsewhere, Sellar’s major new 350,000 sq ft office scheme Paddington Square has transformed the landscape next to the west London station. Bond Street, too, has seen GPE’s 221,000 sq ft Hanover Square scheme go up around its new station, and Tottenham Court Road has Derwent’s 285,000 sq ft Soho Place.  It is what Alexander Jan, chief economist at the London Property Alliance, calls the “announcement effect”. “Sophisticated investors have been looking at Crossrail and identifying longer-term opportunities that they know will come when it actually opens,” he says. “Developers have anticipated the benefits it will bring to the office market for years and acted upon that.” In many cases, this has already filtered through to the leasing market. Deutsche Bank’s decision to move to 21 Moorfields in the City was largely driven by the fact the building is set on top of Moorgate station, which has an Elizabeth Line stop. Meanwhile, a recent proliferation of tech giants in the City Fringe has, by most accounts, come as a result of the increased connectivity brought by Farringdon station.  Shaun Simons, co-founder of City Fringe office agent Compton, says: “[Crossrail] has been a major contributing factor to the comprehensive improvements and regeneration of the Farringdon district, and assisted with landing some of the world’s largest tech companies such as TikTok, Snapchat and LinkedIn.” Next stops For all the changes the project has already brought to London, experts agree the best is yet to come. Fnd to end, the Elizabeth Line will stretch more than 62m, from Reading and Heathrow in the west to Shenfield and Abbey Wood in the east. That means it will bring another 1.5m people within a 45-minutes commute of London’s key business districts, opening companies up to vast pools of employee talent they could not access before.  Jan says: “Quite a lot of the impact on people’s journey times, the opportunities to access jobs in central London, those effects are yet to manifest themselves. That is partly because until people experience it, they can’t factor in or don’t realise the impact Crossrail is going to have.” It could also contribute to improvements to some of London’s most important areas of public realm and shopping streets, with Oxford Street being the most notable example. Crossrail opens on both Bond Street and Tottenham Court Road just as Westminster Council resumes a £150m push to revitalise the area post-Covid, and as department stores in the key shopping district seek investors to help them convert vast swathes of their flagship premises into offices. Philip Hobley, head of London offices at Knight Frank, says: “Arriving at your destination on new air-conditioned, Wi-Fi enabled rolling stock and hitting the pavement outside one of the Elizabeth Line stations is going to be transformational for the areas easily accessible by foot that it serves, not just the obvious immediate buildings.” Proponents of the project estimate it will add an extra £42bn to the UK economy, with more than 200m trips expected to be taken on the line each year (down from an estimated 260m pre-Covid). It is thought the line will eventually accommodate 300,000 new jobs in key business areas. Oliver Bamber, Savills’ central London investment director, says: “All of that kind of initial bounce and anticipation of value appreciation feels like a long time ago. There’s going to be a secondary bounce here, a post-event realisation in rents and capital values, and a demand from both occupiers and investors to further cluster around this new infrastructure project. “There was a time when we were talking to investors that Crossrail had been delayed so much that it was almost embarrassing to talk about it. Now, it’s ridiculously exciting.”   To send feedback, e-mail newsdesk@eg.co.uk or tweet @EGPropertyNews All images © Transport for London