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Future Transport Funding Shortfalls Could Put Brakes On London Development

For the past few decades, the story of major new development in London has been a story of transport. Battersea Power Station, King’s Cross, Canary Wharf, myriad schemes on the route of Crossrail: None of them could have happened without investment in transport. 

But as Transport for London struggles to fill a funding black hole and the government eyes more infrastructure investment outside of London as part of its levelling up agenda, that link between transport and new development in London may be severed. 

Ashurst's Richard Vernon, Sellar's Jonathan Ring, Battersea's Gordon Adams, RTPI's Harry Steele, tp bennett's Caterina Polidoro and Lendlease's Jenny Sawyer

“I think a big challenge for transit-oriented development is going to be funding,” Battersea Power Station Head of Planning and Public Affairs Gordon Adams told the audience at Bisnow’s London Placemaking and Transit-Oriented Development event, held at JTRE’s One Triptych Place scheme. 

The 9M SF of development ongoing at Battersea Power Station only became viable because of an extension to the Northern Line, Adams said, which was built using a funding solution that allowed future business rates to be borrowed against and used to fund the cost of the new line.

Without such models, in which the public and private sectors work together to allow transport to fund development and development to fund transport, such major schemes become difficult to achieve.

TfL is locked in talks with the government over its long-term funding. It received government assistance during the pandemic after a collapse in fare revenue. 

While London transport infrastructure such as the recently opened Elizabeth Line (Crossrail) was partly funded using central government money, future projects the London mayoralty say are vital to meet the city’s transport needs, like Crossrail 2, are unlikely to receive any external assistance. 

CACI's Tolga Necar, EPR Architects' James Everitt, JTRE's Christian Stocker, Grosvenor's Heather Topel, Savills' Iain Buzza and British Land's Emma Cariaga

The benefit of new transport infrastructure to the real estate industry is highlighted in rental data. Correlation is not causation, and it is not possible to isolate the Crossrail effect entirely, but rents in Clerkenwell and Shoreditch rose 123% between Crossrail being started in 2008 and 2022, data from Cushman & Wakefield shows. Paddington rents have risen 45%. 

“I think there are lots of different methods [to] try to bring financing into transport improvements, and not all have been successful, and a lot of them take a long time, and it very much depends on the transport infrastructure required,” Sellar Development Director Jonathan Ring said.

But there are methods that work, he said. The developer is building a new Bakerloo Line ticket hall at the company’s office development above Paddington station, putting in step-free access. It is tunnelling underneath the existing escalator lines and started demolishing the old Royal Mail building while Crossrail was still in the building.

“So you can work together. I would emphasise it's not easy. It's not easy and there are some big challenges,” Ring said. “All the different organisations have to accept and work together to deliver, but there are mechanisms that work.”

JTRE Acquisitions Director Christian Stocker said that because the majority of schemes in London's most central postcodes are easily accessible by public transport, each building itself has to shine to attract workers and tenants. 

“With the transport hubs we've got, we've never been closer to each other. My belief is that we enable the location by creating [a] good scheme,” he said. “You have to be able to create something special: Mediocrity is gone.”