Thursday, 8 October 2015

They own land! Give them Crossrail!

From City AM:

THE ARRIVAL of Crossrail is set to bring a £2.45bn boost to the West End by 2020 as thousands more visitors pour into central London, new research shows.

The New West End Company (NWEC), which represents 600 businesses, said annual turnover for its retailers is predicted to hit £11.25bn just two years after completion of the new high-speed rail link, compared with £8.8bn today.

Oxford Street will retain the lion’s share of consumer spending at £6.15bn, followed by Regent Street at £1.88bn, and Bond Street at £1.44bn, according to research conducted by retail property consultancy Harper Dennis Hobbs for the NWEC.

Crossrail is expected to cost [the taxpayer] £15 billion.

This has lifted land prices near stations all along the route of course, but (as I have shown before), the uplift in rental values between Tottenham Court Road and Bond Street (which already has the highest location values in the whole of the UK and possibly the whole world) alone would just about enough to pay for the whole thing (assuming half of that extra turnover goes into higher rents and those extra rents were collected in tax).

For sure, there is an element of beggar-my-neighbour. In the short term, the uplift in the west end will be partly offset by declining rental values for retail premises elsewhere. However, those other retail premises can then be used for something else (offices, residential) so the effect is only short term.


Ben Jamin' said...

The upping of agglomeration effects by building capital to more efficiently exploit them is a win-win for everyone. In theory.

Only as you point out, this (tiny bit increased) demand is shifted from one location to another, it's really a big win for one group of landowners who cream off the majority of that shift.

This is a pity as those revenues could instead go into lowering the burden of taxes on output. What we have now distorts the correct allocation of capital.

It's a black hole. The bigger it gets the more it eats.

This isn't healthy. Good for London, but bad for the UK taken as a whole.

Which is why this whole devolution thing is bad news. IMHO.

Silly Libdems/SNP.