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Mind the gap - the opportunities and pitfalls facing developers with the Transport for London's land development programme

This article was first published on 28 April 2015 by Building Products and the full article can be found online here

With Transport for London now embarking on a significant programme of land development Ashfords LLP looks at some of the opportunities and pitfalls facing developers, against the backdrop of recent amendments to change of use planning rules.

Transport for London (TfL) is now mid-way through a process of appointing a number of development partners to help it develop opportunities in its property portfolio. TfL owns around 5,700 acres of land across the capital including buildings, land attached to tube stations, railways and highways, making it one of London’s largest landowners.

Initially TfL is looking to develop 10 million ft2 at 50 locations across the city over a period of ten years. The jewel in the crown of TfL’s portfolio is the Company’s former headquarters in a Grade-I listed building in St James’s Park, but its portfolio also includes:

  • Listed buildings that offer opportunities for residential conversion
  • Opportunities for mixed-use and residential developments over stations and depots
  • Land suited to major regeneration schemes in urban centres
  • Brownfield land in inner and outer London.

The initiative comes hot on the heels of the TfL’s joint venture in March 2014 at Earls’ Court with developer Capital and Counties, which looks to create 7,500 homes and 10,000 jobs. The development of the first 10 million ft2 is hoped to net TfL between £1.1bn and £3.4bn over the next decade.

A major opportunity for the sell-off may be the air rights above stations and other installations. In many cases station buildings are relatively low rise and opportunities will arise, subject to planning and conservation restraints, to build upwards. There have been numerous disposals facilitated by redesigning the operational installations, then ‘slabbing’ over and building above. This approach also has the benefit of hiding the facility whilst freeing up a substantial opportunity. This approach can be utilised, in particular, for railway lines in deep cuttings, with areas of track enclosed and built over.

One of the greatest obstacles that may require some creative thought by the developer partners – and to be encountered in any sell-off of former operational assets – is that alternative uses may be entrenched in relation to the site, for example cable ducts passing through the land or maintenance access routes. Sometimes facilities will be shared with, or be immediately adjacent to Network Rail installations. In such cases there may well be restrictions on any development, usually within 20 m. This, along with historic restrictive covenants affecting the land, may well give rise to any form of development being restricted.

Planning overhaul
This initiative from TfL comes at a time when the planning rules on the re-use of buildings are being re-written. In an effort to boost housing numbers, the Government has allowed the change of use of offices, shops and even agricultural buildings to residential, without the need for formal planning permission, but subject to a prior approval process. These rights will currently expire on 30 May 2016.

The response of developers to these proposals has been very patchy across the country. In a few of the London Boroughs and better residential locations (for example: Oxford, Cambridge and Chichester) there has been significant activity, but elsewhere agents report it being very quiet.

Where there has been considerable activity in Boroughs like Islington, Camden and Croydon, the Councils have been fighting hard to retain their office stock, employing whatever planning weaponry they can. Only recently was Camden’s attempt to use the Human Rights legislation to stop the conversion of office buildings to residential use rejected comprehensively by the Secretary of State. In some areas, commercial office developers are seeing the office to residential project as a great opportunity. In other locations such as Ealing in West London, the existing office stock has all but dried up as a result of the changes, as a result of which rents are rising and new build schemes are again becoming viable.

Elsewhere the biggest challenge to developers has been the shortage of development finance for smaller operators. Even where prior approvals have been given on schemes there are not enough developers in the market with the cash needed to deliver these schemes. Additionally, many residential developers are more familiar with working on a ‘knock-down and start again’ development model for tired office buildings and these sorts of refurbishment opportunities are outside their comfort zone.

The release of more redundant TfL offices and other buildings onto the market is potentially going to create a further wave of residential conversions, either through the conventional planning route or under permitted development rights, if the Government extends these beyond May 2016. The likelihood is that the location of these sites will be where the market wants new housing and TfL will be able to select development partners with the ability to deliver that. However, given what we have seen elsewhere, this may bring TfL into conflict with Councils who are keen to preserve office stock or realise mixed-use schemes and the process of achieving necessary approvals may not be smooth.