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Commercial Property News For London - November 2011 |
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Backing technology
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| The days when the City was a
jealous guardian of its role as the
top global financial centre has
shifted to a more subtle position.
That earlier hostility was
mainly directed at Canary Wharf,
which is now a fact of life and
has added to the global appeal
of London. The new role is to
foster the creation of an East
London Tech City stretching
from a roundabout in Shoreditch
to the Olympic site in Stratford.
Young entrepreneurs and
new start ups are flocking to the
area around Silicon Roundabout.
Simon McGinn of the City
of London said: “The City
Corporation has facilitated the
start up of an Innovation Centre
in Smithfield which provides
advice and guidance to SMEs
(small and medium enterprises).
In fact, we have already actively
supported the SME community
for some years through the
provision of affordable
accommodation in City fringe
areas.” He noted that the
government was pushing the
initiative hard with its vehicle,
the Technology Strategy Board,
having a £200 million war chest
to help the high tech industry. In
fact the government has taken
its role to promote the Tech City
aggressively as witnessed by its
support for Eric van der Kleij as
UK’s Trade and Industry’s
“entrepreneur in residence.”
Also, Intel has thrown its
weight behind Tech City,
earmarking a supercomputer,
capable of handling 2.25 trillion
calculations per second, for start
up companies in the area to use
free of charge. The City of
London has sponsored a scheme
known as “Angels in the City” to
recruit 125 investors prepared
to put seed money into new
companies. The scheme is in
cooperation with the London
Business Angels and aims to
generate £10 million in new
investment annually.
What attracts the young
businesses to the area is that
costs, notably rent, are
relatively low and they are
physically close to sources of
funding in the Square Mile.
Access to these young
companies is one of the
reasons why Google and Cisco
have moved into the area.
McGinn points out that “it is
hard to plan a cluster of like
minded companies and
entrepreneurs but in the case
of Shoreditch there was already
the framework for high tech
operations because the creative
industries had already moved in.”
The competition from other
parts of Europe, notably Berlin
and Dublin, is fierce. The
advantage in London is the
adjacent pool of wealth through
individuals and financial
institutions plus the experience
of the City of London. |
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Getting the best return
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| One West End site that will be
developed mainly for offices is
8-10 Hanover Street which has
been sold by LaSalle Investment
Management to Morgan Capital
Partners for over £25 million.
The property has planning
permission for a mixed use
scheme for offices of 2,321
sq.metres (24,984 sq.ft.),
together with retailing and six
apartments.
“The sale of this asset is the
culmination of a process of site
acquisition, planning, design
and construction development
which has resulted in superior
returns for our pension fund
client,” said LaSalle’s Richard
Maple. |
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In fine fettle
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| What is clear is that the City
office market continues in fine
fettle, despite the woes of the
national economy, with new
developments and a flood of
investment deals. The City of
London has given planning
permission for four new
schemes, including greater
height for Great Portland Estates’
and Brookfield Office Properties’
950,000 sq.ft.100 Bishopsgate
scheme. A similarly sized
scheme is planned by Hines for
100 Cheapside, where Canary
Wharf Group was originally the
front runner, while Rockspring
and Chesterfield Asset
Management have planning for
a slightly smaller scheme at
Centurion House, EC3.
Rockspring’s Richard Bains said:
“Since acquiring the project last
year, we have drawn up
ambitious plans to create an
entirely new ground up
development which will appeal
to a wide range of city
occupiers.” The largest
development getting planning
permission was City Site Estates’
11 storey scheme of 12,077
sq.metres (130,000 sq.ft.) at 51
Eastcheap, EC3. One scheme that
already has planning permission
is Hammerson’s £485 million
Principal Place, E1 project. Now
Hammerson is seeking a partner
for the 50 storey residential
element of the 73,856 sq.metres
(795,000 sq.ft.) development
which will have 243 private and
56 affordable units. |
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In Brief #1
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| Among the major companies
seeking large offices is the
advertising group Ogilvy &
Mather which needs 32,515
sq.metres (350,000 sq.ft.).
Among its short listed
properties is the former Fruit &
Wool Exchange in Spitalfields
and another City of London
building, Norton Folgate.
Viridis Real Estate has started
to develop the 8,397 sq.metres
(90,384 sq.ft.) scheme at 67
Lombard Street, which will also
have a retail unit, on behalf of
a private client. |
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Summer high
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| Far from slowing down, office
demand in central London rose
strongly again in August with a
13% rise in the City pushing
requirements up to 706,040
sq.metres (7.6 million sq.ft.).
There was a contrast with the
West End, said CBRE, where
demand was steady at 445,920
sq.metres (4.8 million sq.ft.).
Digby Flower of CBRE said:
“However, a fourth consecutive
month that space under offer
has remained at or above the
ten year average reaffirms our
belief that the second half of the
year will witness an improved
picture on the first six months.”
Further research by CBRE has
shown that secondary property
has taken over from prime in
leading capital growth. Yields on
prime central London offices
have stabilised but have
tightened on secondary property.
“Yield compression on prime
property looks to have run its
course,“ said Peter Damesick,
EMEA (Europe, Middle East &
Africa) Chief Economist at CBRE.
London commercial property
remains the best performing part
of the UK with Midtown
outpacing the other London
areas throughout the summer.
Iain Malcolm of Farebrother said
“Total investment transactions
and occupier take up in Midtown
could match, or even exceed,
pre recession levels by the end
of the year. Demand from a wide
variety of business sectors, low
supply (6% availability rate) and
a modest development pipeline
has driven investor interest.”
The most notable recent
lettings have been at UK &
European’s recently completed
1 Kingsway, where the creators
of the iconic Wolseley restaurant
will be opening a new 13,500 sq.ft.
sister restaurant at the end of
this year. Tate & Lyle has taken
the top floors (24,780 sq.ft.) for
its new corporate headquarters
at a headline rent of £67.50 per
sq.ft. a benchmark for new space
in WC2 in the current cycle and
John Laing has just signed up on
the 1st & 2nd floors.
One part of Midtown has
been transformed with the first
stage of the Chancery Lane
Enhancement Project completed.
It has brought a host of
improvements from footpath
widening and repaving as well
as better street lighting. There
has also been tree planting and
new seating.
City of London Planning Chief,
Peter Rees, said: ”This long term
strategy has been carefully
coordinated to preserve the
unique character of one of the
most historic and unusual streets
in the City while also making it
fit for purpose as part of a |
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Big numbers for West End residential
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| Developers’ ambitions to build
ultra luxury apartments in the
West End are increasing as
the flow of foreign buyers
continues to grow, the latest
being Greek and Spanish
investors seeking safe havens
for their cash.
Among the luxury projects is
a proposed plan by Brockton
Capital for a £400 million
residential scheme on a corner
site at 56 Curzon Street where it
has been piecing together the
land since 2007.
At the moment, the block has
35 flats and the new scheme
would have a restaurant, garden,
spa and underground parking.
Initial estimates are that selling
prices would be £48,420 a
sq.metre (£4,500 a sq.ft.).
Another major residential
scheme is for the Clarges Estate
at 82-84 Piccadilly, a former
office of the MI6 spy agency,
which is expected to go to
Chelsfield Partners for £170
million. The 1 acre scheme could
mean similar prices to those
expected for Brockton’s project
and comes at a time when there
is a shortage of major sites for
offices in the West End.
John Caudwell, who made
a fortune marketing mobile
telephones, has joined in the
quest for luxury residential
schemes in the heart of Mayfair.
He has purchased Audley Square
House for £143 million and
plans a large residential
scheme.
Caudwell said: “The intention
is not just to re establish Audley
Square as one of the most
desirable residential areas in
London, but as one of the
most desirable in the world,
with super prime properties
appealing to the most
discerning buyers and I believe
traditional Mayfair architecture |
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How long will the fun last?
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| The intriguing question in London
is how long the inward flow of
money into prime assets will
continue, although the recent
increase from Greece and Spain
indicates demand is undiminished.
Apparently there are no limits
to what can be sold with the
German CLI Group Fund putting
the iconic 28,910 sq.m. Lloyds
Building on the market for £290
million for a yield of 5.5%.
A similar price is being asked
for the 30,110 sq.m Tower 42,
another landmark property in the
Square Mile.
Knight Frank’s Stephen Clifton
said: “Investors with global
perspective can find best in class
assets and tenant covenants in
the city.” Adding to the attraction
is that sterling is down 30%
since 2007 and there is also the
consideration of the euro being
under pressure. The high prices
available and the prospect of
rental increases make this a perfect
period for selling, particularly as
some of the German funds show
large gains.
One of the largest portfolios on
offer is from KanAm which is using
Knight Frank for the 34,373 sq.m.
headquarters of the European
Bank for Reconstruction and
Development at One Exchange
Square, EC2. Also in the portfolio,
which could raise £1 billion, are
Deutsche Bank’s Winchester
House, Thomson Reuters’ 30
South Colonnade and Olswing’s
HQ at 90 High Holborn.
Some of the selling is coming
from the Irish, such as Shieldpoint,
which is putting the 8,361 sq.m.
Royal London House at 22-25
Finsbury Square on the market
through Savills. This is the third
time Shieldpoint has sought to
sell city properties in the past
two years. What is impressive in
London is the wide range of
investors. For example, the
Canadian group Brookfield is
prepared to pay over £300
million for the 42,734 sq.m.
Broadgate West, EC2, from Gemini
Commercial for a yield of 6%. |
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Bringing opportunities
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| As usually happens, building
new transport networks opens
up development opportunities. In
this case it is the Crossrail with
its creation of new stations.
Derwent, in collaboration with
Crossrail, has put in a planning
application for a mixed use
scheme of 25,548 sq.metres to
be built above the new
Tottenham Court Road Station, to
be called 1 Oxford Street. The
main part is offices of 16,443
sq.metres on eight floors,
complemented by further offices
and a new 350 seat theatre.
There will also be retail space.
Derwent’s John Burns commented:
“The planning application is an
important first step in the much
needed revitalisation of the
eastern end of Oxford Street and
is essential for the long term
growth of Fitzrovia and Soho,
where we have holdings of over
139,350 sq.metres.” Derwent
now has planning permission for
a mixed use scheme of 31,214
sq.metres at 80 Charlotte Street,
Fitzrovia, W1 plus more residential
space at nearby 65 Whitfield
Street and Whitfield Place. It will
be part new build and part
refurbishment to a design by
Make Architects on an island site
in the middle of Fitzrovia. It will
have a capital value of £125
million. Public realm improvements
bring the creation of a new park.
Derwent has also linked with
Grosvenor for a mixed use scheme
at 1-5 Grosvenor Place, next to
Hyde Park Corner, that will
feature a hotel, commercial and
residential space. Just to add to
the big list of Derwent projects,
it has planning permission for
another mixed use scheme of
27,034 sq.metres at the City
Road Estate, EC1. This will be
mainly offices with some retail
and residential accommodation. |
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In Brief #2
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| Axa Real Estate Investment
Managers is seeking planning
permission for a mixed use
scheme with offices of 5,574
sq.metres (59,995 sq.ft.);
retailing of 1,829 sq.metres
(20,013 sq.ft.) and possibly
residential space at 1 St Paul’s.
The development is being
undertaken on behalf of a
single client mandate. |
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Branson
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| At the moment the London
market is like a steam roller
possessing its own momentum
that is bringing in swathes of
foreign investment on the back
of rising rents.
That foreign investment is
coming from every part of the
world, from China to Greece
(recently increased from
Greece) and North America.
The transformation of
London is visible with such
landmark buildings as the
Shard nearing completion.
There is a raft of development
plans, notably from Derwent,
that indicates the pace of
change will continue.
The Derwent plan for
Tottenham Court Crossrail
and Underground Station
shows the way for a spate of
development on the physical
changes brought by the
building of the Crossrail link
across London. We will see lots
of schemes along those lines.
London’s flexibility in
accommodating new
development is highlighted by
Silicon Roundabout in
Shoreditch as part of a high
technology corridor to the
Olympic site in Stratford. The
government has been unusually
fast on its feet to push this idea
with promotion and seed money
which is likely to be followed by
funding from the Square Mile.
That process has been
encouraged by the City of
London Corporation, who have
helped city fringe areas with
advice and cash for many
years, something that is often
ignored when it is accused of
fostering the |
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