London Development: Eastern Corridor - Savills
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UK Cross Sector - Spring 2020
S P OT L I G H T London Development:
Eastern Corridor
Savills Research
Can supply meet demand in London’s Eastern Growth Corridor?
Overview Overview
East London locations
London’s Eastern Corridor spans from Stratford to Havering. It is the most affordable stretch of London
despite significant investment in infrastructure and large clusters of development. When Crossrail fully
opens, connectivity to central employment hubs will improve vastly, with potentially huge levels
of demand waiting in the wings to capitalize.
Barking and Dagenham Havering Redbridge
Average 10-year house Average 10-year house Average 10-year house
transaction value price growth transaction value price growth transaction value price growth
£310,000 88% £401,000 79% £451,000 74%
Council regeneration company, Despite over half of the Regeneration across the
Eastern corridor
Be First, plans to deliver 50,000 borough lying within the Crossrail corridor is expected
new homes and 20,000 jobs over Green Belt, three existing stations to deliver 4,850 new homes
the next 20 years with 400 will service Crossrail and a new and 20,000sqm of retail
hectares of development land. station is to open at Beam Park floorspace between Seven Kings,
The size of Barking & Dagenham’s in 2022. Goodmayes and Chadwell Heath.
Emerging and affordable but under-supplied Night Time Economy more than
doubled between 2007 and 2017.
The unaffordability of London has been well documented East has contributed to a buzzing student scene.
in recent years, with home ownership seemingly out of reach Loughborough University, University College London Hackney Newham Tower Hamlets
for many. Over the last ten years, the average house price in and Staffordshire University all now have campuses on
London has risen by 83%, vastly outstripping income growth. at the Queen Elizabeth Olympic Park.
The Eastern Corridor is one of the few remaining areas that
is relatively affordable. Unique in its affordability
Despite the significant development and investment in recent East London is one of the only areas which can offer affordable Average 10-year house Average 10-year house Average 10-year house
transaction value price growth transaction value price growth transaction value price growth
years, there is still expected to be a further influx of demand for market housing to the average Londoner. Four of the seven
housing once Crossrail is complete and operational, presenting cheapest boroughs are situated in East London, and when £591,000 112% £378,000 90% £509,000 64%
an opportunity for developers to put themselves in a position to Crossrail is fully functioning, residents will no longer have to
capitalise on this current and future demand. sacrifice convenient travel times to live in East London. Home to East London Tech City No London borough will have From 2009 to 2019, the
The new Crossrail line will service 14 stations outside which has fueled a 94% increase more Crossrail stations than population of Tower Hamlets
A change of scene zone 1, compared to just eight in West London, highlighting in GVA in the Information & Newham, and by 2025, an has grown by 34%, faster than
Whilst large parts of East London are covered by industrial the importance the line will play in unlocking opportunities Communication and Professional, estimated £22billion will have anywhere else in London.
buildings and cheap housing, the scene is changing, with a in the Eastern Corridor. Travel times into key employment Scientific and Tech sectors. been invested in the area.
helping hand from Crossrail which, when fully functioning, hubs will be cut by 35% in places such as Ilford, and convert
will open up scores of new opportunities and connectivity eastern town centres into a more viable option for commuting Waltham Forest
between East and central London. This change has already been into central London.
seen over the last decade. From 2009 to 2019, the value of goods Compared to areas in other parts of London that can
and services produced in the Information & Communication offer similar travel times, East London locations are
and Professional, Scientific and Tech sectors in East London has significantly more affordable. Journeys from Romford to
Average 10-year house
increased by 72%, whilst population growth in the area has the nearest three major employment hubs take 30–35 minutes, transaction value price growth
increased by 19%, both at a rate higher than the London average. but the area has average residential transaction values 13%
The younger generation also has reason to look east. lower than a West London equivalent in West Drayton, and is £460,000 124%
Hackney, Barking and Dagenham and Newham lead the way nearly half the value of Southgate in the north, and Streatham Since the 2007/08 peak,
when it comes to the increase in cultural and leisure services in the south. Even Stratford which is one of East London’s values have risen by more than
in the Night Time economy between 2007 and 2017, with all most expensive locations, which with Crossrail will see travel any other borough, but are still
East London boroughs performing better than the London times cut to under 15 minutes, offers significant value 27% below the London average.
average. Furthermore, the emergence of Shoreditch’s Tech compared to the comparable locations of South Kensington
City has attracted swathes of young professionals and Here and Camden Town.
Source: Land Registry
2 3
Overview Overview
At a price point desperately needed Residential values by travel time East London offers potential to deliver
in London from main employment hubs new homes at the price they are most needed
In London, the shortfall in supply is not evenly spread ■ Under £450psf
across price points. We calculate that 70% of demand for Southgate ■ £450psf - £700psf
£591,000 Crossrail stations
buying or renting is for housing below £450psf and sub-market
Crossrail line
housing, but just 30% of forecasted completions throughout
■ Green belt
2020–2024 are expected to come through at this price point.
N
This is where the greatest shortfall in supply is, and where the
greatest opportunity exists for developers. This also highlights
the opportunity for developers in East London particularly, West Drayton 30-35 Romford
W E
£367,000 minutes £318,000
with the new build £psf in large parts of Barking and
Dagenham and town centres such as Ilford and Romford
S
falling below £450psf.
The upper mainstream market (£700psf - £1,000psf ) is
likely to be fully supplied over the next five years, with high
Streatham
levels of competition and slower sales rates to be expected. £568,000
Although, and despite being in the early stages of consultation,
the 30% discount proposed for First Homes is likely to open up
opportunities in these markets. Due to the already low capital Camden Town
values in the Eastern Corridor, this discount could make £909,000
homes at this price point more affordable, unlike in other
parts of London where the homes would remain unaffordable
due to higher starting capital values. N
South
Under 15 Stratford
Kensington W E
Supply isn’t keeping up minutes £562,000
£1,800,000
Despite the recent increase in housing delivery post
Olympics in East London, it faces the same supply challenge S
as the rest of London. Over the three years to Q1 2019, only
Hackney has delivered the required number of homes set out
Stockwell
in the 2019 Planning Inspectorate’s review of the London Plan. £599,000
Havering and Barking and Dagenham face the largest
challenge in meeting their new targets, currently delivering Source: Savills Research, Land Registry
Source: Savills Research, Land Registry, MHCLG, EGi, Molior
Supply and demand in London by price point
■ Occupier Demand ■ Market Housing Completions ■ Affordable Rent & Intermediate Housing Completions just 21% and 28% of their targets respectively. If supply
continues to fail to keep up with the growing demand for Summary
housing in this area, this could see the affordability advantage The Eastern Corridor has been firmly put on the map
45,000
evaporate in East London. with the help of Crossrail, putting the connectivity of
40,000 However, Barking and Dagenham and Havering are the East London now on par with some of the more
two local authorities whose councils have the greatest traditionally aspirational parts of London towards the
(net annual average completions)
35,000 development ambitions for the next five years. Lifting the West. Whilst investment into the area has picked up in
Housing Revenue Account (HRA) debt cap has contributed recent years, it has remained the most affordable part of
30,000
to an increase in development activity from local councils, London, and when Crossrail is up and running the
New homes
specifically from local housing companies. demand in these areas will be huge. There is still
25,000
a large undersupply of housing in this part of London, and
20,000 The next five years therefore an opportunity for developers to put themselves
Forecasted capital value growth in mainstream London in a position to absorb the strong demand.
15,000 is relatively muted at 4% over the next five years, and
predominantly restricted by mortgage affordability. However,
10,000
the lower capital values means this is less of a pressure in the
Eastern Corridor, giving it the opportunity to outperform
5,000
other parts of London.
0
Sub-Market Housing Lower mainstream Mid mainstream Upper mainstream
(Affordable & Social Rent) (>£450psf) (£450-700psf) (£700-1000psf)
Source: Savills Research, Molior, MHCLG, CACI, Oxford Economics
4 5
Development Development
A lack of stock has resulted in commercial rental growth, with
31% London’s Eastern Corridor is anticipated to deliver
further potential for growth for high quality refurbishments
31% of London’s housing supply over the next five years
Development engagement with the planning authority along with landowners
recognising when existing uses no longer suit the specific
Romford
When Crossrail is operational, travel times from Romford
opportunities
location. Abbey Retail Park in Barking and Dagenham (full town centre to key employment hubs will be cut by more than
permission), and Ilford Retail Park (application) could provide 20%, making it a more attractive option for central London
over 2,000 homes between them. commuters. Development of the former Ice Rink has gained
Close proximity to stations and transport hubs will always be permission for over 600 homes and 830sqm of commercial
Newham and Tower Hamlets are leading the way a priority, with clear pockets of development picking up around floorspace, whilst a joint venture between First Base and
areas seeing infrastructure investment. The Barking Riverside Havering is to deliver a mixed use development in the town
There are over 350 development sites that we expect to be comprehensive review of the Green Belt in London, the Mayor rail extension, new Silvertown Tunnel and upgrades to Lee centre including 1,000 residential units.
marketing private homes over the next five years, estimated rejected this possibility as part of the next London Plan review. Valley rail service are expected to be functioning by 2025.
to account for 31% of supply coming forwards across the whole There is over 9,000ha of Green Belt land in the Eastern Barking Riverside and town centre
of London. However, 20% of that is concentrated in Newham Corridor, and releasing land close to stations or where it is poor Ilford Aside from the 10,800 homes and new train station opening in
and Tower Hamlets alone, with just 5% in Havering, Redbridge quality could provide opportunities for development to satisfy A number of town centre developments are coming forward, December 2021, Barking Riverside will create a new riverfront
and Waltham Forest combined. the increasing need for housing in London. Alternative options most notably the 680 homes to be built above Sainsbury’s. town with schools and 65,000 sq m of commercial and cultural
Development potential in these three boroughs is constrained could include repurposing retail space or redundant offices, More recently, plans have been announced to redevelop Ilford space. In Barking town centre, Gascoigne Estate and Abbey Quay
by the Green Belt, and despite the Planning Inspectorate’s particularly in areas with a lack of quality town centre stock. retail park into 2.5 acres of homes, offices and retail space to have planning permission for over 2,500 homes combined.
recommendation that Sadiq Khan should lead a strategic and For this to be a viable option, there will need to be developer be branded as Ilford Eastside.
Rainham
Notable schemes and opportunity (sites of over 20 units) Beam Park spearheads development in Rainham, which
Redbridge
will provide 3,000 homes to complement a new railway
372 homes under
Waltham Forest construction
station, medical centre, two new schools and retail space.
1,645 homes under More recently, Clarion’s 717 home development has been
1,400 homes expected
Hackney construction granted planning permission.
to market in 2020-24
2,188 homes under 2,600 homes expected
construction to market in 2020-24 Havering More than just residential?
Whilst in the four highlighted areas there is significant
3,700 homes expected 613 homes under
amounts of residential development, the commercial and office
to market in 2020-24 Newham construction
markets have seen a distinct lack of activity. Romford & Ilford
4,099 homes under 3,300 homes expected
is a small office market that caters for small local occupiers but
construction to market in 2020-24
it is a strategic location that is set to benefit from infrastructure
17,500 homes expected improvements. A lack of supply has resulted in take-up volumes
to market in 2020-24
being muted as there has been a lack of floorspace available
over 10,000 sq ft. Permitted development rights have eroded
the office stock levels in both markets, it estimated that at least
300,000 sq ft has been converted to residential.
The lack of supply in the market has resulted in rental
growth. Headline rents in Romford have reached £20 per sq
ft, increasing since 2016 where they were only £14.50 per sq ft.
Further rental growth could be captured if refurbished stock
was brought to the market. Romford has further room for rental
growth and offers a discount to neighbouring markets such as
Stratford and Brentwood.
Sites expected to market units between
Summary
2020 - 2024 by size (no. of private
The pipeline of the Eastern Corridor’s residential supply is
units) and development status
largely concentrated around existing transport hubs Canary
Under 200 200 - 400 400 - 600 Wharf and Stratford, but with areas further east soon
becoming more connected to central London, that is likely to
600 - 800 Over 800 change. Potential buyers are likely to have previously rented
Barking and Dagenham
in more central parts of London, and to move further out will
Tower Hamlets 1,879 homes under demand a similar standard of living. Successful placemaking
● Under construction ● Permission
construction is going to be vital to attract this demand. Whilst the office
10,095 homes under ● In Planning ● Pre planning
construction 7,700 homes expected Infastructure Crossrail stations market in these areas has been muted so far, areas such as
to market in 2020-24 Crossrail line
Romford still offers relative value compared to neighbouring
17,300 homes expected
to market in 2020-24 markets and could well see rental growth in the future.
Source: Savills Research, Molior
6 7
New build market New build market
Tower Hamlets has seen the largest
79% of movers to new build properties number of Help to Buy sales in the
in East London already live in the capital last year of any London borough
Who’s moving to The challenge of post Help to Buy
There is no doubting the influence Help to Buy (HtB) has had in are among the few areas in London where the First Homes policy
the Eastern Corridor? maintaining the new build sales market in London, particularly
since the 40% equity loan was introduced in Q2 2016. Since
then, the number of HtB sales in London has increased three-
could work, making homes affordable to more buyers without
requiring steep discounts that would affect the site viability.
Naturally, this raises the question of the impact on the
Is current supply meeting demand? fold, now making up around a third of all new build sales in market once the current Government commitment to the
London. Tower Hamlets has seen the largest number of HtB scheme ends in 2023. The overleaf charts group the new build
Households that have moved into new build properties in The most common household types moving sales in the year to Q3 2019, with Waltham Forest and Newham sales numbers by transaction value in the year to November
East London in recent years tend to have moved from local into new build properties in East London also in the top six London boroughs. 2019 in inner and outer East London boroughs. Two median
areas, and on average moved just 1.5 miles. Whilst 79% of The scheme has also been pivotal in encouraging inner London salaries would only have been able to afford 27%
all movers have come from within London, there has been City Prosperity development. Since Q2 2016 the number of HtB loans as a of new build properties that transacted without HtB, assuming
demand from areas just outside the London border, from proportion of new home EPCs is 43% in Havering, and 31% they have a 25% deposit.
Metro High Flyers (23%) Penthouse Chic (10%)
Purfleet and Chafford Hundred, and further east from in Barking and Dagenham. First Homes will undoubtedly be In the outer East London boroughs, there is less of a reliance
Career-minded 20 and City professionals renting
Chelmsford. Nearly two thirds of movers were under the 30-somethings renting premium-priced flats in important in the boroughs where HtB has been so important. on HtB, as over half of new build sales would have been affordable
age of 40, though this comes with variation by borough; 72% expensive apartments in prestige central locations Boroughs such as Tower Hamlets and Barking and Dagenham for two outer London median earners without the scheme.
of movers into Tower Hamlets were under the age of 40, highly commutable areas
compared to just 58% in Waltham Forest. of major cities Help to Buy loans as a proportion of new home EPCs since Q2 2016
Just under two thirds of all households moving into
Rental Hubs EPCs HtB loans HtB loans as
East London can be grouped into two household groups,
Central Pulse (12%)
(Q2 2016 to Q3 2019) (Q2 2016 to Q3 2019) % of EPCs
and four household types. City Prosperity households, Flexible Workforce (20%)
generally very successful and high-earning individuals, tended Successful young renters City-loving youngsters Barking and Dagenham 2,254 704 31%
ready to move to follow renting central flats in
to move into Hackney, Newham, Tower Hamlets and Waltham Hackney 5,101 482 9%
worthwhile incomes from vibrant locations close
Forest. Rental Hubs, younger professionals generally at the to jobs and night life Havering 685 43%
service sector jobs 1,583
start of their careers, were more inclined to look to the three
Newham 8,571 737 9%
most eastern boroughs, in search of more affordable well- Source: Experian
connected areas.
Redbridge 2,301 394 17%
Tower Hamlets 11,716 1,394 12%
Where have households moving into East London moved from? Waltham Forest 2,819 724 26%
Source: MHCLG
Chelmsford
Proposed Port Quarter
Number of movers at Barking Riverside
into East London
■1-5
■ 5 - 10
■ 10 - 25
■ 25 - 50
■ Over 50
Crossrail stations
Waltham Forest Crossrail line
Redbridge
Hackney
Havering
Barking and
Newham Dagenham
Tower Hamlets
Chafford Hundred
Purfleet
Source: Savills Research
8 9
New build market New build market
Depth of market in inner East London (Hackney, Newham, Tower Hamlets) The role of Build to Rent Conversely, the potential of areas like Ilford, which sees
The Build to Rent (BTR) sector has seen significant similar proportions of private renters, remains relatively
■ New houses ■ New flats institutional investment in the past few years, making up untapped by institutional investors. With prospective renters
(25% deposit)
(10% deposit)
9%
Full purchase
Full purchase
26% of all London’s new build sales, as recorded by Molior, in being sensitive to connectivity to employment hubs, there is
(40% equity
Help to Buy
8% 2019, up from just 10% in 2014. There are over 7,000 complete potential for the BTR sector to grow in these areas once the
Proportion of new build sales
7% BTR homes in East London, with a further 6,500 under fully operational Crossrail provides improved connectivity
loan)
construction and 13,000 in planning. further east, and take advantage of the increasingly transient
6%
Nearly three quarters of East London BTR completions rental population in London.
5%
have been in Newham or Tower Hamlets, with areas such as From a wider viewpoint, with the end of HtB in sight, the
4% Stratford and Canary Wharf already seeing significant levels of BTR sector can go a long way to filling in the anticipated void.
3% BTR activity. Cherry Park at Stratford which will see 1,224 BTR
2%
homes delivered is currently under construction, whilst to the
south, Limmo Peninsula and TwelveTrees Park are in planning Summary
1%
and each could potentially deliver over 1,000 BTR homes. East London is a popular destination for successful,
0% Canary Wharf Group’s new BTR arm, Vertus, saw residents relatively young inner-city workers in recent years, with
move into their first BTR building at 10 George Street in Stratford and Tower Hamlets being popular destinations
50,000
70,000
90,000
110,000
130,000
150,000
170,000
190,000
210,000
230,000
250,000
270,000
290,000
310,000
330,000
350,000
370,000
390,000
410,000
430,000
450,000
470,000
490,000
520,000
560,000
600,000
640,000
680,000
750,000
850,000
950,000
1,100,000
1,250,000
1,400,000
1,600,000
1,750,000
1,900,000
3,000,000
5,000,000
Over 10m
February. The 37 storey tower sits at the heart of Canary for these households. Help to Buy has played a significant
Wharf and has been letting very well in its early stages. With role in supporting new build sales, and also in encouraging
Transaction value £ flexible tenancy terms and deposit options, 10 George Street delivery in the outer boroughs of the Eastern Corridor.
Source: Land Registry, ASHE. Assumes 4.5 LTI, 2 median earners and a 40% HtB equity loan may well raise the bar for what tenants come to expect from Once government commitment to the current scheme
a BTR development. Vertus is set to introduce two more ends, Build to Rent, and, no doubt, the impending First
rental schemes to the market this year, at its Water Street Homes will all play a role in plugging the gap.
Depth of market in outer East London
development and Newfoundland.
(Barking & Dagenham, Havering, Redbridge, Waltham Forest)
■ New houses ■ New flats
(25% deposit)
(10% deposit)
Full purchase
Full purchase
9%
(40% equity
Help to Buy
8%
The Build to Rent pipeline
Proportion of new build sales
7%
loan)
6%
5%
4%
3%
2%
1%
0%
50,000
70,000
90,000
110,000
130,000
150,000
170,000
190,000
210,000
230,000
250,000
270,000
290,000
310,000
330,000
350,000
370,000
390,000
410,000
430,000
450,000
470,000
490,000
520,000
560,000
600,000
640,000
680,000
750,000
850,000
950,000
1,100,000
1,250,000
1,400,000
1,600,000
1,750,000
1,900,000
3,000,000
5,000,000
Over 10m
Transaction value £
Source: Land Registry, ASHE. Assumes 4.5 LTI, 2 median earners and a 40% HtB equity loan
Crossrail stations
Crossrail line
What homes need to be built?
BTR status
Analysis of local household incomes and current stock with good incomes and ‘City Diversity’ who are families that
● Complete
shows a significant affordability gap in East London. tend to be renting social flats in city suburbs. Therefore, there ● Construction
Assuming households spend 30% of their income on housing will be demand for different types of product. ● Planning
costs, there is a lack of housing supply for those earning The latter will most likely require some form of
Proportion of
between £20,000 and £45,000, and a clear opportunity to affordable housing big enough for families with children,
BRS households
plug the gap. whereas the former will look for one or two bedroom flats
■ Under 10%
According to Experian, there are three main household as potentially their first step on the housing ladder. Mortgage ■ 10% - 20%
types that fall within this income band; ‘Flexible Workspace’ borrowing restrictions would also suggest There is be ■ 20% - 30%
who are successful, young renters, ‘Culture & Comfort’ significant demand for intermediate product such as Shared ■ 40% - 50%
households who are thriving families in diverse suburbs Ownership or First Homes when Help to Buy comes to an end. ■ Over 50%
Source: Savills Research, British Property Foundation, Experian and Molior
10 11
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