Demand for commercial property in the UK has fallen for three consecutive months and meanwhile its prices are dropping. It’s estimated the value of offices fell by 0.2% last January compared to January 2010.
Although this fall may seem relatively insubstantial there are undoubtedly greater profits to be made from developing luxury homes, and some developers are turning unwanted office space in London’s Square Mile into luxury flats, reports OPP.
These developers include Berkeley Group Holdings, Axa Real Estate Investment Managers and Heron International, among others. JP Morgan Chase has predicted office rents in the city could fall by between 4% and 6% this year, while values could drop by as much as 7.3%. Popular properties for renovation include Brownfield sites or older offices on the edge of the financial district. Heron International is constructing a 36 storey residential property near the Barbican, while Berkeley has plans to renovate a derelict property near Moorgate. They have gained approval to renovate Roman House into 90 apartments.
Apparently offices which are more than 15 years old can no longer be marketed as prime office space, and this is applicable to nearly 50% of all office space within the city. Axa is currently looking at sites in Clerkenwell, Shoreditch and Farringdon and has plans to build residences and offices that will be worth $158 million once completed. The company views residential property as being more profitable and reckons home values are around 10% to 15% more than office space in the area around St Paul’s Cathedral.
When compared with other areas of central London, property within the city of London seems much more affordable with costs ranging from between £650-£1350 a square foot whereas property in Belgravia and Mayfair typically costs around £1982 and £1960 respectively.