Bloomberg News

Developers Double London Apartment Density Amid Land Squeeze

February 15, 2012

(Adds City of London projects in sixth paragraph.)

Feb. 15 (Bloomberg) -- Homebuilders are adding more than twice as many properties into new developments in London, increasing density in the U.K.’s most populous city, according to Jones Lang LaSalle Inc.

The 101,870 homes completed in the five years through March 2011 were built at a density of 100 residences per hectare of land, according Jones Lang. That compares with 50 dwellings per hectare for the 68,870 built in the previous decade.

The amount of land approved for development in the U.K. capital fell in the past decade even as demand for residential real estate and tight supply helped boost prices, said Jon Neale, a residential research director for the Chicago-based broker.

“Land will become a constraining factor,” Neale said by e-mail. “The increase in density is partly driven by broader economic and social trends, namely the greater desire for central London property. The only way this can be accommodated is by increasing height and density.”

London’s Shard skyscraper, the highest in Western Europe, will have apartments, hotels, offices and restaurants when it opens next year. Berkeley Group Holdings Plc plans 11-story and 12-story residential towers in London’s Westminster district and is constructing apartment blocks in Kensington. Heron International Inc. is building a 36-story residential tower in the City of London financial district.

Financial District

The Heron is one of two new projects under way in the City of London, according to Savills Plc. The other is a 158- apartment building by Tower Bridge, which is being developed by Cheval Residences Ltd. From 2007 to 2011, landlords began turning 19 commercial buildings in the district into homes.

About 830 hectares of land were released for residential development by planning authorities in the four years through 2009, a drop of 10 percent from the same period through 2004. That may add pressure to change protections for the green belt, land bordering London where building is banned, Neale said.

“London’s size has been fixed by policy and it cannot grow outward,” he said. “We’ve been resistant for generations to the idea that cities could expand into precious green fields. Ultimately, though, that is the only way to increase land supply.”

The U.K. government is trying to simplify planning approval by whittling down more than 1,000 pages of regulations to 52 while trying to balance an area’s economic, social and environmental needs. Opponents including the National Trust say the reforms may expose the countryside to urban sprawl.

Apartment prices in London rise 1.5 percent for each floor of height, according to research last week by Los Angeles-based broker CBRE Group Inc. The city’s residential tower developments have a 36 percent price premium over other new build developments, CBRE said.

--Editors: Ross Larsen, Jeff St.Onge.

To contact the reporter on this story: Chris Spillane in London at cspillane3@bloomberg.net.

To contact the editor responsible for this story: Ross Larsen at Rlarsen2@bloomberg.net.


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