Belt Tightening in the West End:

Back in February we reported the increasing trend for the luxurious Georgian building of Mayfair and St James’s to be converted back into private residences (http://propertyforum.blogspot.co.uk/2012/02/home-office.html)

A recent report from our friends at Cushman & Wakefield now confirms this, and also raise an interesting question with regard to perceptions in these straightened times.  It would appear that now only 50% of hedge fund managers are based in the area, compared to over 70% 5 years ago.  The exodus away from the area to the more affordable and less extravagant Marylebone, Soho and Knightsbridge (really?) is continuing, they say.  With hedge funds losing 3% of their value last month alone, investors are, apparently, less impressed with the lavish offices and wish those managing their funds to have a more frugal presence.

One of the effects of this is to place upward pressure on the market in the area.  Rental levels on refurbished space in Mayfair are already breaking the £100 per sq ft level and, with a narrowing range of choice as new developments hit an all time low, there will be continual upward pressure on the limited vacant space available.

Govt. Acts on Empty Homes

Easing the pressure on families who have inadequate housing should be a primary focus for any Government.  Those who are fortunate to be able to close the front door of their own home at the end of the day cannot be too grateful for this privilege.  Helping more families to be able to do this is a key objective for any society.

At a time when house building is bumping along the bottom in terms of new home starts the Government has increased its initiative to energise local councils into refurbishing and bringing back into use empty homes.

In the UK there are more than 700,000 empty homes, over 280,000 of which have been unused and under-maintained for six months or more.  Empty homes that can often attract anti-social behaviour, vandalism and fly-tipping to neighbourhoods and depress the values of other homes in the area.

Communities Minister Andrew Stunell offered £50 million Government funding to areas with clusters of empty homes which have good market prospects, such as access to transport links, but require intensive refurbishment to return them to a liveable standard.  Administered by the Homes and Communities Agency, councils who wish to apply will have to match the funding they receive - bringing the total investment to £100 million. Every successful bid must have strong local support and aim to bring at least 100 homes back into use.  Mr Stunell said:

"It's shocking that hundreds of thousands of houses sit unoccupied while people across the country are in need of a home of their own”.

Councils will also be rewarded by the application of the New homes Bonus scheme measuring the total number of long term empty properties. 

Home Office?

Planning consents for the conversion of offices to residential buildings in the West End is on the increase.  Last year schemes totalling more that 2 million sq ft of conversion were granted, significantly up on the 202,000 sq ft in 2010.  Values of West End conversions are being quoted at the £3,000 per sq ft mark as against £2,000 per sq ft for office space and a number of office building are currently on the market to attract residential developers to drain even more for the pool of available commercial space.  It is thought the demand is, yet again in the London residential market, being driven by demand from “overseas buyers” with the kudos of Mayfair and St. James’s being too great an attraction to resist.

Westminster Council would appear to be keen on this latest trend, showing limited resistance to the movement to convert.  Indeed, new planning regulations may make it even easier to carry these out without the need for a change of use consent.  The trend will continue to put the squeeze on the West End commercial occupier, those creating and bringing wealth into the capital on a continuing basis.  Rental levels on refurbished space in Mayfair are already breaking the £100 per sq ft level and, with a narrowing range of choice as new developments hit an all time low, there will be continual upward pressure on the limited vacant space available.

This is all very well for the present as the Capital’s residential market continues to resist the national trend of stagnation and even regression in housing prices.  Where there’s a fast buck to be made, why not?  When the economy turns, (and it has to doesn’t it?) the time lag to address the requirement for more commercial accommodation will be significant. Apart from the obvious lack of acreage in the West End, and they’re not making any more of that, the timescales to prepare and develop either new build, conversions or refurbishment will mean that the shortage of available space will be with us for some time to come.

Not all is doom and gloom on this front, however.  There are those who welcome the return to original usage of some fine buildings, with period features once again being brought back to a life they were originally intended for.