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EAST LONDON GROWTH STORY GETTING HACKNEYED

11 March 2015

From Shoreditch and Old Street to Dalston and Spitalfields, East London has developed into an excellent source of good property investments over the past few years.

A closer look at recent investment and demographic changes in Hackney shows how investment potential has continued its march across the East End.

East End investments have become an increasingly prevalent feature of London property investor portfolios over recent years. The gentrification of some of the city’s most traditionally working class neighbourhoods has presented a wealth of opportunities borne out of a rising popularity among London’s creative classes combined with significant regeneration investment. 

In years gone past we’ve seen this effect lift the likes of Shoreditch and more recently Old Street into some of the capital’s most fashionable areas. New media and technology industries in particular were key in driving change in these markets, but as their popularity grew, so did the price of real estate – an effect seen very clearly in the hugely successful Eagle House and Lexicon projects we launched in 2013

London’s creatives have since looked further east for the next area in which to congregate, and the neighbouring borough of Hackney has become a top choice for many. Figures from the 2011 UK Census show that over the course of a decade Hackney saw a 65% rise in residents employed in culture, media and sports occupations, the highest of any London borough. Neighbouring Tower Hamlets was next on the list with a 45% rise.

Savills Graph.png

Such demographic trends have skewed the Hackney population young, with a the borough boasting a larger 25-34 aged population than the citywide average, as well as bringing more total residents to the area; Hackney’s working age population grew by 30% over the decade to 2011, while the borough’s total population is expected to exceed 300,000 within twenty years, which would represent further growth of over 20%.

The influence of the nearby Tech City region in Old Street cannot be overstated here as the huge growth in the city’s high-tech sector sees more and more businesses spilling across into Hackney as they look to stay close to the action while saving on commercial rents. 

Meanwhile, the established professionals of the City and beyond have also been paying attention to this migration, and are following en masse in much the same way as was previously seen in Notting Hill and Shoreditch; Hackney’s number of corporate managers and directors grew by 182% between 2004 and 2013. 

The area retains its bohemian atmosphere however, with boutique shops and artisanal cafes dotting the landscape, and the prevalence of bicycles speaking volumes about the area’s young and environmentally conscious population. Hackney residents are typically unworried by a lack of parking spaces, with more residents cycling to work than in any other London borough. The 2011 census also recorded a 50% increase in the borough’s number of walking commuters, up to a not insignificant 14,054. 

Authority monitoring report 2011-12 - Hackney Council. GLA Population Projections, pg26

Of course, public transport remains a critical concern for the majority, but this is another area in which recent developments have lifted the attractions of Hackney living. Improved National Rail services from London Fields rail station in particular have put local residents just nine minutes from Liverpool Street, four times an hour. This puts the Hackney area within quick and easy reach of the forthcoming Crossrail services that will considerably enhance connectivity right across the capital. 

Even more important was the GBP1 billion investment in the London Overground rail network that brought Hackney to the iconic Tube map for the first time in 2007. This development has made a huge difference in the area – look out for our blog post dedicated to the impact the “Ginger Line” has had on East London next week. 

That’s not the only investment the borough has seen in recent years. The 2012 London Olympics, based at nearby Stratford, has been a huge driver of regeneration in the area. Some GBP12.5 billion has been spent on local infrastructure in securing the legacy of the games, including the iconic Queen Elizabeth Olympic Park, which has since been opened to the public. 

In Hackney, this Olympian investment has included widespread streetscape improvements, with pavement renewal and widening projects going hand in hand with the introduction of 20 mile-per-hour zones and a new bus lane system to better accommodate further public transport upgrades. Hackney High Street will remain permanently pedestrianised following a trial, and the local council is now consulting with local traders, residents and shoppers about the direction further regeneration should take, with funding already secured from Transport for London. 

A GBP14.9 million investment in the facilities at the famous Hackney Marshes – setting of this famous Nike ad featuring some of the world’s most well-known footballers – has a been a key part of developing the area’s sporting amenities. The Olympic legacy programme also saw the establishment of two new riverside parks, creating 28 acres of new green space for the borough. 

The Olympics also inspired the relocation of BT Sport’s operations to Hackney Wick, which created 300 new jobs. Such job creation was a theme of the Olympic legacy for Hackney, with the borough seeing its employment rate rise by 15.9% between 2004 and 2011, the largest increase seen in any of the Olympics’ host boroughs. 

All of these demographic changes and regeneration investments have very clearly been translated through to the Hackney real estate market, with recent statistics showing the area is prime for London property investment.

House Price Growth Graph.png

Hackney again saw the biggest benefit of any Olympic host borough as its real estate prices rose by 69% between 2003 and 2012, and this growth continues now at an even faster rate, with the Land Registry putting average Hackney growth in the year to January 2015 at an excellent 15%.

This growth also carries over to the rental sector as well, with the Valuation Office having rents across the borough increasing 10-15% across 2012/13. Such growth is key for investor yields, which can currently be expected to come in at a rate of above 4%, comparing very favourably with the rates of 1-2% now commonly achieved closer to the centre of the city. 

Looking ahead, we can expect homebuyers and renters to continue looking to locations that offer lower prices without compromising on proximity to the city’s prime areas and major employment hubs. Hackney fits this profile perfectly, and this status is serving as a strong basis for bullish predictions on future price growth, with a recent Savills report puts growth in prime suburbs such as Hackney at 25.7% over the next five years.

It seems clear property investment in Hackney will be presenting buyers with a very enticing proposition in the years ahead. Don’t take your eyes off this part of London. 

IP Global

Written by IP Global

IP Global’s full-service approach is built on extensive market research and analysis combined with a significant financial commitment to every investment we offer. We are able to manage the entire investment process end-to-end, from sourcing, financing, and management to those all important exit strategies, making investment in real estate as straightforward as investing in more traditional asset classes. Our expertise, experience and strong record have produced over USD2.8 billion in international real estate investments in over 30 markets worldwide.

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