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Spotlight Westminster and Pimlico 2015

Savills World Research UK Residential

savills.co.uk/research

Investors and owner occupiers are attracted to such a central, well connected location

Market overviewThe heaRT Of The CiTy

W estminster and Pimlico sit in the heart of London

within the prime central borough of the City of Westminster and are beginning to be considered part of the established prime housing market. Investors and owner occupiers alike are buying property in the area, attracted to the relative value on offer from such a central, well connected location.

In Westminster, regeneration is in mid-swing as the transformation of Victoria continues. Over the past year, one third of sales were new build apartments, ranging in price from £650k to over £10m. The existing housing stock is benefitting from the development activity as the area receives significant investment with the aim of creating an attractive fringe of the West End, in a way that Shoreditch and Spitalfields have become to the City.

By contrast, very little development is happening in Pimlico. Over the past 12 months, just 5% of sales were new build properties, albeit the highest level since 2010. Pimlico’s housing stock includes a number of garden squares and large four and five storey white stucco fronted terrace houses.

Much of this is architecturally similar to the neighbouring super prime market of Belgravia, though in a more affordable price bracket.

Property pricesBoth Westminster and Pimlico offer good value in comparison to the rest of central London. The average sale price over the past year in Westminster and Pimlico (as illustrated in Figure 2) were £1.29m and £950k respectively, 13% and 36% cheaper than across the City of Westminster as a whole.

Both locations are significantly better value than the neighbouring district of Belgravia where, despite sitting just across the railway line from Pimlico, the average sale price was £3.3m.

Unsurprisingly, new properties in Westminster trade at a premium as regeneration attracts new types of buyers to the area. Over the past year, the average sale price of new build flats was £1.58m, 43% more expensive than a resale flat.

Rental valuesRental values in Westminster and Pimlico also offer good value. In Westminster, the median monthly rent of £2,300 is slightly lower (3%) than the City of Westminster average and in Pimlico it is 21% below at £1,800 per month, according to Rightmove. Across both locations, the average rent varies from around £1,100 per month for a studio to over £5,000 per month for a 4+ bed property.

OpportunityChange is underway in Westminster. The area has always had the location and transport links but historically hasn’t provided the same attractive urban environment as neighbouring locations, particularly around the congested train, tube and coach stations. Redevelopment and regeneration are establishing the area as prime, by attracting better shops and restaurants and upmarket businesses and amenities.

We believe this will be a catalyst to progressively unlock the latent value of the housing stock in locations surrounding the redevelopment by attracting demand from increasingly affluent occupiers. n

Spotlight | Westminster and Pimlico

1ST flOOR flaT, 700 Sq fT, 2 BedS & 2 BaThS

location Postcode Sale Price Rental value*

alderney Street

SW1V£750k – £800k

£475 – £525

Buckingham Gate

SW1E£800k –

£1m£575 – £625

vincent Square

SW1P£900k – £1.15

£625 – £675

Thirleby Road

SW1P£900k – £1.15m

£600 – £650

Warwick Square

SW1V£1m –

£1.25m£625 – £675

Source: Savills Research *Per week

What would the same property sell/rent for on our featured roads?FIGURE 1

The housing market around Westminster and Pimlico 2014A look at where the sales happened and at what value

FIGURE 2

Source: Land Registry

Average Sale Price 2014

n £4m+n £3m - £4mn £2m - £3m n £1m to £2mn £500k - £1mn under £500k

PeRiOd hOuSe, 3,000 Sq fT, 4 BedROOMS

location Postcode Sale Price Rental value*

Catherine Place

SW1E£3.95m –

£4.5m£2,000 - £2,250

Sussex Street

SW1V£3.95m –

£4.5m£2,050 –£2,400

vincent Square

SW1P£4m – £4.5m

£2,200 –£2,500

Smith Square

SW1P£4.5m –£4.95m

£2,100 – £2,350

queen annes Gate SW1H

£5m – £5.5m

£2,250 –£2,750

WeSTMinSTeR (SW1P, SW1H & SW1E)

BelGRavia (SW1W)

PiMliCO (SW1V)

Demand for property in Westminster and Pimlico currently comes from a number of sources

InvestmentWheRe Will The deMand COMe fROM?

C ommercially, Westminster is fast becoming an important

fringe of the West End, attracting new smaller creative businesses such as Lightspeed Research, Nesta and Digiterre. As the redevelopment continues and more office space is being built, we estimate that approximately 1.3m sq ft of office development will be delivered in Victoria between 2016 and 2018. This is likely to attract more people to both work and live in the area.

The Professional, Scientific and Tech sector is the largest employment industry for people living in Westminster and Pimlico accounting for 16.8% of the employees, according to the 2011 Census. The Financial and Insurance sector comes second at 15.9% respectively.

In the more traditional prime locations, such as Belgravia, the financial industry tends to be more dominant. However, over the next five years Oxford Economics forecasts that while the Financial and Insurance industry will experience minimal growth, employees in the Professional, Scientific and Tech industry will increase by 15.6% to become the largest employment industry in central London. Westminster and Pimlico are well placed to draw on the newly created wealth that will result, as

Tech buyers in particular look for alternative locations to live.

International residents are an important source of demand for the prime housing market in London, accounting for around 38% of buyers. In the prime markets of Westminster and Pimlico, currently 46% of people looking to buy through Savills are from overseas, coming from 23 different countries. This indicates that international wealth will play a further role in the evolution of the area’s housing market.

investors Investment buyers are particularly attracted to this part of London as there is a mature private rented

sector. According to the 2011 Census, 25.1% of households in London are in the private rented sector and in Westminster and Pimlico the proportion is significantly higher at 34.4% and 35.0% of all households respectively.

Demand for prime rental properties in the area is driven by a strong employment market and an increasing number of international companies in London. Savills figures show that of the tenants renting prime properties in Westminster and Pimlico just 25% are British, with a similar proportion of tenants originating from Western Europe, accounting for 27%. n

There is a mature private rented sector in

Westminster and Pimlico

“Investment buyers are particularly attracted to this part of London” Sophie Chick, Savills Research

Summer 2015

DevelopmentWhaT aRe The develOPMenT PlanS fOR WeSTMinSTeR?

Source: Land Securities

n nova: 170 private residential units with retail and officen Portland house: 206 residential units with retail or restaurantsn Cardinal Place: office and retailn The Zig Zag Building: office and retail

n 123 victoria Street: office and retailn Wellington house: 59 residential units with retail n Kings Gate: 102 residential units with retail or restaurantsn 62 Buckingham Gate: office and retail

T he area around Victoria station is undergoing a transformation. Land

Securities is instrumental in the redevelopment as it owns most of the buildings on Victoria Street, including New Scotland Yard, Westminster Town Hall, Kings Gate and many more. This means the change that will happen here will be comprehensive, rather than a series of piecemeal improvements.

Land Securities currently has a 2.2m sq ft development pipeline for Victoria and is investing £2bn in refurbishing existing buildings and constructing new ones to house offices, shops, restaurants and people.

The transformation of Victoria actually began in 2006 with the

completion of Cardinal Place, a retail and office building. Since then 123 Victoria Street, Wellington House and 62 Buckingham Gate have all been built.

Land Securities is not alone in identifying Westminster as a good

residential development site as illustrated in Figure 4 above. A small number of these schemes, located near Buckingham Palace, are expected to achieve super prime prices of £3,000 per sq ft and above. n

Other key residential developments in Westminster*Principle Player Site name Total units

alchemi Group55 Victoria Street 54

Great Minster House North 160

Berkeley Group9 Millbank 300

Abell House + Cleland House 275

northacre 1 Palace Street 72

heron Corporation Riverwalk 113

St edward homes Ergon House 162

Taylor Wimpey Central london Westminster Quarter - Site 1 & 2 154

FIGURE 4

Source: Savills Research *Schemes by developers other than Land Securities with over 50 private units, which we expect to deliver units over the next five years

a new victoria A look at the key Land Securities developmentsFIGURE 3

CaRdinal PlaCeCOMPLETE

PORTland hOuSe DELIVERY 2020

nOva, viCTORia DELIVERY 2016-2018

viCTORia STaTiOn uPGRade 2016-2018

The ZiG ZaG BuildinG DELIVERY SUMMER 2015

WellinGTOn hOuSe COMPLETE KinGS GaTe

DELIVERY SUMMER 2015

62 BuCKinGhaM GaTe COMPLETE

123 viCTORia STReeT COMPLETE

Spotlight | Westminster and Pimlico

02

to see the start of the deferred demand from the pre-election period flow back into the prime housing market, particularly given that the spectre of a mansion tax is now removed.

While this positive sentiment is likely to translate into an increase in transaction numbers, we expect the impact on house price growth to be slower, as it will take time for the high levels of available stock that have built

up during a long period of pre-election caution to be absorbed. The regeneration in Victoria is likely to result in an additional uplift in prices in the surrounding areas of Westminster and we expect this to cause a ripple effect further into Pimlico. This offers an opportunity for buyers as the regeneration is not expected to finish for another three to five years.

The rental marketAcross prime London, the strengthening economy will underpin demand for prime rental property. We expect rents to rise by 17.1% on average over the next five years. In Westminster and Pimlico, the number of private renters is already high and it is well placed to attract more investment from both traditional and institutional investors. However, this might put rental values under pressure if high levels of new build stock enter the rental market in the short term. Over the long term, rental values are likely to see a similar uplift to the sales values on the back of the regeneration. n

OutlookOPPORTuniTieS lie ahead

T he outlook for Westminster and Pimlico needs to be considered in the context

of the wider prime London market. In the lead up to the election property prices across prime London saw small falls due to the uncertainty in the market and the stamp duty changes announced in the 2014 Autumn Statement. However, following the Conservative Party general election victory, we are beginning

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Please contact us for further information

Matthew Morton-Smith Residential Sales020 3430 6861mmsmith@savills.com

Sophie ChickUK Residential Research 020 7016 3786schick@savills.com

Matt ParishResidential Lettings 020 3430 6871mparish@savills.com

nina CoulterResidential Development 020 7409 8701ncoulter@savills.com