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Dark Days For London's Transport Infrastructure: Why Property Needs To Wake Up

Meet Anthony Breach. He works for a London policy thinktank, and today he is pondering changes to his simple daily commute from an apartment block in Lewisham, via the new Jubilee Line underground service, to London Bridge. It is an easy 10-minute journey, no changes, no hassle. 

If Jubilee Line services were reduced — or the line was mothballed altogether — Breach would still be OK. There’s an overground train that does the same job, also 10 minutes, no changes. The trouble comes if he wants to move jobs, because most policy jobs are in Westminster and if the Jubilee Line isn’t working or gets too slow, he’d be stuck. “I’d have to move home,” he said. “I’m watching closely.” If you are young and ambitious and London is pretty much the only place you can ply your trade, this is a serious worry.

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As it happens Breach is a senior analyst with an interest in transport policy, and nobody knows better than him what looming cuts at Transport for London mean.

TfL is facing a £2B funding gap and Mayor of London Sadiq Khan has issued a dire warning that an entire Tube line could close if the Government does not grant TfL the emergency and long-term funding it needs. The Bakerloo and Jubilee Lines get mentioned a lot.

The existing funding deal with the Department of Transport expires this week. What comes next is anyone’s guess but “managed decline” is the phrase used by TfL. This does not sound comforting. 

Yet as Breach’s story shows, London is lavishly provided with multiple public transport options to an extent that puts it in a league of its own among UK cities, and all but a few others worldwide. As if to prove the point, the new £18.7B Crossrail line stretching 73 miles under and over the capital, west to east, is due to open (after many delays) next year. This will happen regardless of cuts elsewhere.

In the context of so much amazing transport infrastructure, vastly expanded and improved over the last 20 years, surely trimming a few bus services, or narrowing tube train capacity, isn’t going to make much difference?

OK, Londoners will moan — but capital city dwellers like moaning, it’s what they do. London will go on as usual. At least at first. But in the medium term there are places where it will hurt and hurt badly. 

So where, and when, and who is going to get bruised?

The Threat To The Centre

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A popular answer: the West End, the City and Midtown. These central London districts already suffer more constrained transport capacity, and are more dependent on it, than the more peripheral central London neighbourhoods like the South Bank or Shoreditch. They will feel the pain first, so the theory goes.

This is among the fears facing Alexander Jan, chief economic advisor to the London Property Alliance, a group of City and West End landlords. For the record Jan walks to work from his home in Fitzrovia to offices in Hatton Garden and Holborn, where he is chair of business improvement districts. His commute will be unchanged if tube lines are mothballed or bus services slashed.

“The areas most dependent on public transport will see it first — the City, West End, Midtown, Westminster, Canary Wharf,” Jan said. “We know these core markets struggled most during Covid for exactly that reason, so we can imagine they will be hit hardest again. And of course whatever happens comes on top of the whole Covid experience, which is a challenge. So cuts to transport spending is another significant policy blow with the risk of insidious decline.”

Jan said a government-imposed cut on Transport for London would signal to investors and developers that it is not interested in sustaining London infrastructure, and that will damage confidence and undermine footfall as organisations try to encourage people to return to city centres.

“What’s worrying is that the government don’t seem to care,” Jan said. “It would be premature to say London has reached a structural tipping point, and long-term decline comes next. But when the economic tide next comes in, London will not have the infrastructure to cope with the demands placed upon it.” 

Jan worries that Crossrail could end up being mothballed, in the process damaging the many dozens of large property schemes now clustered around its not-yet-operating stations.

According to London’s mayor, Sadiq Khan, there will also be impacts for suburban housing and commercial schemes. This includes the delivery of a further 6,000 homes planned for Colindale station in Barnet, a second station entrance at Walthamstow Central to support the major redevelopment around the nearby shopping centre, and 30,000 new homes in Beckton Riverside and Greenwich that would be unlocked by an extension of the Docklands Light Railway.

Detailed Decisions

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Developers are worried, but anxious not to appear so. Canary Wharf suffered for years from poor connections to the rest of the London transport network, and it depends on the Jubilee Line for its lifeblood. Canary Wharf Group declined to talk to Bisnow about how worried it might be by TfL cuts.

Landsec, which just sold the 278K SF 6-9 Harbour Exchange, Canary Wharf, for close to £200M as it pivots investment back toward central London offices, was more forthcoming.

“The importance of an integrated, well-funded and efficient public transport network has never been greater,” Landsec Managing Director for Central London Marcus Geddes told Bisnow.

“it’s more important than ever that the right infrastructure is in place to ensure London can welcome people back, be they workers, shoppers, visitors and tourists. The health of London’s retail, leisure and entertainment sectors relies on this footfall, as do its businesses rely on getting the right talent and skills into their offices.”

As for investors, the mood is mixed. Knight Frank figures showed they ploughed £2.2B into central London in the 10 weeks since 1 October, roughly half from the U.S., taking volumes back up to pre-pandemic levels. There is plainly no evidence of panic. No evidence, either, that the mostly overseas investors who fuel London’s property boom have even noticed there’s a threat. But there are reasons to be cautious.

Shabab Qadar is the London research partner at Knight Frank, and another Jubilee Line commuter, this time from New Cross via Canary Wharf’s Canada Water to Baker Street in the West End. “It would screw things, I’d have to drastically alter my commute,” he said of the prospect of Jubilee Line cuts or mothballing. 

Qadar reckons the diversification of the London economy, long-term structural shifts in the city’s favour and some shorter-term bouncing back all insulate the city as a whole from serious damage. London will weather cuts to transport funding. But he warns that it could divert investment within the city.

“Due diligence on buys is now quite granular. They want to see office buildings close to a transport hub, no more than 5-10 minutes away, and that is very important to them,” said Qadar, reporting a chat last week with private equity buyers looking at a £20M lot in West London. “Yes, its near Harrods, but the area isn’t all the same, and these guys understood that and wanted to learn about the precise location.”

Qadar suspects buyers will turn up their noses at sites with poorer transport links, and divert resources toward the sites that score better. The result will be increased competition for the favoured lots, causing prices to rise.

In The Real World

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Back in his London Bridge office at the Centre for Cities, senior analyst Breach is crunching the numbers of London’s economy. 

“The impact of cutting Transport for London could be complex and unexpected,” he told Bisnow. “Maybe the crunch will be for jobs in the central areas, but it may be people on lower incomes who live in the East End who suffer, not the wealthy commuters from the western suburbs.” 

Most London commuters either genuinely have to commute into the capital every day, or convince themselves they have no choice because London offers the higher wages and wider opportunities they want. This suggests there will be no mass exodus if the tube lines get a bit slower or more crowded.

But a loss of transport capacity comes with costs, costs Breach warned may take years to become visible. “London’s appeal remains unchanged, and it's still good whether the Jubilee Line has 10 trains an hour or just five. But it will mean changes. For instance, if I took a job in Westminster, I’d also have to find a different place to live because the commute wouldn’t be viable otherwise.”

In the next few days we will learn what the Department of Transport proposes to do, and (perhaps) how much additional rescue funding it will provide. The chance of entire tube lines closing is small and seems to originate in a Mayoral press release. London bodies of course have an interest in prognosticating doom if the funding from government isn't forthcoming.

Approached by Bisnow, Transport for London said: “We are eager to work in partnership with the Government to safeguard the recovery and to agree a longer-term funding deal as we work towards achieving financial sustainability by April 2023. No decisions have yet been made about specific lines or services.”

According to Transport for London reports the “managed decline” envisaged to meet funding cuts involves putting some good ideas on ice, and some other big projects on hold, whilst extending the life of existing rolling stock and signalling systems. 

No doubt not having a new operational signal box at Elephant & Castle, no Bakerloo line extension and no Crossrail 2 is unfortunate, but it is not a cut to existing services. And as Jen, Breach and Qadar’s personal commutes show, alternative routes and the facts of working life mean things will carry on as usual even if TfL closed a line: a nuisance, definitely, but not a disaster.

Yet behind the rhetoric and the inflated claims, there sits a real problem. Investors and developers have plenty of confidence in London, but it is not unlimited in either time or geography. There will be knock-on consequences, and they will grow as time goes on. Cautious players will already be calmly arranging Plan B investment strategies, just in case.