A new report from Pastor Real Estate has revealed there could be as much as £1.3 billion locked in car park sites throughout Marylebone and Mayfair, and that the construction of high-spec residential developments on these sites could substantially boost the underlying land values in central London.
PROPERTY DEMAND IN CENTRAL LONDON
The demand for units in these desirable areas is nothing if not highly publicised, as is the red-hot nature of the local property markets. Rates of residential development throughout Prime Central London have increased by 8.6 per cent since 2009, but Head of Sales at Pastor Real Estate David Lee reveals that the importance of converting the capital’s car parks should not be ignored if they are to continue on an upward trajectory.
“Increasingly we’re seeing a number of developers turn to car parks in the search for viable residential land in prime central London,” he says. “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. London is evolving and the urban population is getting younger and their dependency on cars is decreasing as transport connections continue to improve. 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.”
RESIDENTIAL DEVELOPMENT VALUE IS LOCKED IN CAR PARKS
The report revealed that there are over 18 operational multi-storey car parks in Mayfair and Marylebone, and that together, these sites are home to more than 4,500 parking spaces. With both prices and demand for luxury, high-end accommodation in these neighborhoods dramatically outstripping the supply, property values have soared. This prompted Pastor to conduct an in-depth analysis to determine how much the land underneath car parks situated on coveted streets could potentially increase if converted.
This analysis concluded that the car park that would potentially warrant the highest residential value is located on Portman Square, Marylebone. The current estimated value is £133.5 million, based on the assumption of an annual income at 4 per cent yield. If converted into a site on which property could be developed, the total residential value of that property could total as much as £496.2 million, assuming it exchanged hands for £3,500 per sq. ft. While residential prices here may typically average £1,500 per sq. ft., the highest transaction recorded in 2015 achieved £3,000 per sq. ft. as new developments increased the desirability and profile of the local area. In other words, Portman Square’s projected value could, in theory, be attained.
There are numerous other public car parks throughout Marylebone too, such as the multi-storey site on Bryanston Street. Situated minutes from the Marble Arch tube station, the 298-space car park currently generates an annual income of £90.6 million. If used for residential development, however, the value could reach £336 million. Similarly, the car park located on Welbeck Street provides an annual return of £109.5 million, a value that could more than triple if the 360 spaces are replaced with a residential scheme.
Nearby Mayfair is not to be ignored, as property values here have increased by 69 percent over the past five years. Given that the highest recorded transaction in 2015 saw property bought at £5,000 per sq. ft., residential developments here could easily fetch more than current car parks. Mayfair is home to the multi-storey car park on Audley Square, bought by Phones4U tycoon John Caudwell with a view to transforming it into a super-prime development reportedly worth up to £2 billion.
Re-examining land usage to find these and other potentially lucrative sites is nothing short of essential when it comes to keeping pace with the demand from buyers interested in the area, David adds. “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. 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-use development.”
Top image credit: peresanz