Findings from a recent report reveal that an approximate £1.3 billion worth of hidden residential value in London is currently being held hostage by multi-story car parks
Converting land currently occupied by car parks into high-quality residential developments could add up to 300% to the value of various sites around London, leading to new developments and helping with the housing crisis London is facing.
Having analysed a selection of multi-story car parks situated within the city’s affluent Mayfair and Marylebone areas, the report revealed that 18 operational sites providing over 4,500 parking spaces are currently concealing an estimated £1.3 billion worth of prime land that could be developed.
With demand for property in central London continuing to grow, the, developers are now beginning to turn to car parks in the two high-performing districts in order to secure prime development opportunities that have the potential to yield incredibly strong returns.
“Increasingly, we’re seeing a number of developers turn to car parks in the search for viable residential land in prime central London,” said Head of Sales at Pastor Real Estate, David Lee. “Whilst fully operational car parks can offer a good return, the high demand for new homes in London makes these sites increasingly more attractive as a luxury residential development.”
In particular, property values in Mayfair have risen exponentially in the past five years, with a 69% rise in land valuation making it one of London’s highest performing residential areas. With residential prices averaging £2,400 per sq ft, the highest transaction recorded in the area in 2015 was over double that at £5,000 per sq ft, making the current demand for prime land plain to see.
Marylebone, meanwhile, has posted similar increases over the past five years, with property values rising by an average of 57%. Typically residential prices in Marylebone average £1,500 per sq ft, but a large number of new luxury developments and high-end restaurants being opened in the area saw that figure peak at a high of £3,000 per sq ft in 2015 – again doubling the current average price.
After taking these figures into account, it is determined that the car park with highest potential residential value is situated on Portman Square, Marylebone, with the site currently providing a value of £133.5 million assuming a 4% yield. However, given its location on one of Marylebone’s finest garden squares, it is estimated that the total residential value of the property to be worth £496.2 million – an assumption based on a not-outlandish figure of £3,500 per sq ft.
Similarly, the 298-space car park on Bryanston Street currently provides an annual income of £90.6 million, but, if redeveloped into a residential scheme, the value of the site could reach £336 million. That is a 270% increase of value. It is a trend that is being witnessed across London as the demand for housing continues to rise, and the aforementioned sites are just two of the development opportunities pinpointed by the report.
“As the demand for prime London property continues to out-strip supply, identifying development opportunities that add value to the neighbourhood, provide high-quality residences and essentially prove commercially viable will become a pressing concern for central London developers,” added Lee. “Throughout the report, we have identified a number of strategic car park sites that could now be more viable and better suited as a residential or mixed-used development.”
With studies indicating that young people taking up residence in London for employment, education or leisure are now increasingly less likely to require parking – indeed, in Mayfair only 36% of residents own a car compared to the city-wide average of 58% – it is hard to argue with the findings that most of these multi-story sites could be put to better and far more lucrative use.
One success story that already exists on this front is that of the parking-to-residential scheme on Chiltern Street in Marylebone. Named The Chilterns, the site received planning permission in August 2011 for 60 luxury apartments and a range of amenities including a wine cellar, private cinema and gym to built and is now a very popular site, with only a couple of the penthouse units yet to be sold.
“London is evolving and the urban population is getting younger and their dependency on cars is decreasing as transport connections continue to improve.” Lee concluded. “This has seen the need for parking in central London decline, whilst the new housing will be a pressing concern in the capital for the foreseeable future.”