LONDON (Reuters) - A record number of London developers looking to build bespoke neighbourhoods from scratch will be emulating the success of centuries-old aristocratic landowning dynasties who have helped transform the capital city in the past 50 years.
Developments like the 67-acre scheme in the King’s Cross district and a 2,818-home plan for the Olympics site are among a dozen projects that have taken lessons from the likes of Grosvenor and Cadogan Estates, areas formed hundreds of years ago that have boosted property values in recent decades by being picky with tenants and improving public areas.
“Everyone increasingly realises that design and maintenance of the environment around the buildings is as likely to improve property values as anything else,” said Sir Terry Farrell, who designed a 77-acre masterplan of shops, offices and homes in the Earls Court district of west London that will be ready in 2032.
“There is a much stronger move towards estate management, the kind of custodianship the great estates have done extremely well,” he told Reuters.
A partnership between British developer Delancey and the development arm of Qatar’s sovereign wealth fund, which will start work on the 67-acre East Village scheme once this summer’s Olympic Games are over, is adopting a similar “placemaking” approach.
It has even hired the former chief executive of Cadogan Estates, which owns much of London’s trendy Chelsea district, as its chairman after paying 557 million pounds for the site last August.
“I was one of the relatively small number of people with experience managing a chunk of London with a long term view,” Stuart Corbyn told Reuters. “The approach with East Village will be long-term though I‘m not suggesting we will be there for 250 years.”
King’s Cross is being developed by British firm Argent, backed by Hermes Real Estate on behalf of the British Telecom (BT.L) pension scheme and led by Roger Madelin, an athletically-built champion of green issues who cycles to work every day.
Once dotted with villages and manor houses, London’s West End district, where much of the English aristocracy’s land is located, became a string of neighbourhoods in the late 18th century as a population boom spread beyond the financial zone to its east.
Grosvenor, the estate that today covers swathes of the upmarket Mayfair and Belgravia districts, is controlled by the UK’s fourth richest man, the Duke of Westminster, currently Gerald Grosvenor.
It was formerly undrained marshland and first acquired through the 1677 marriage of Thomas Grosvenor, a landowner from north-west England, and 12-year-old Mary Davies, heiress to the Manor of Ebury in London.
Such histories created a land ownership structure not seen in many other major global cities. Companies like private equity firms own blocks rather than whole neighbourhoods in New York while Paris’ top shopping streets have many landlords, said Mark Burlton, a retail expert at property broker Cushman & Wakefield.
As guardians of ancestral good fortune rather than profit-led developers, the estates were content to sit back and collect rental income. But that changed in 1967, when the law was revised to give residential leaseholders the right to buy the freeholds, shrinking the size of the estates and shifting their focus to increasing value.
Rents on Cadogan’s Sloane Street have risen 175 percent to 550 per square foot since 1987 in a push by the estate to make it a high-end shopping street that precluded more downmarket retailers from taking space.
Rents on nearby Kensington High Street have only risen 108 percent over the same period, data from property consultancy Colliers International COLL.L showed. They are both served by the same local population but the street’s fragmented ownership produced a mix of shops including low-cost stores like TK Maxx.
In a similar vein, the Howard de Walden Estate, which controls 92 acres of the Marylebone district, doesn’t always seek the highest rent on Marylebone High Street so independent retailers can thrive, raising both the tone and overall value of the estate, which has grown by almost 40 percent to 2.1 billion pounds since 2008.
“We have absolutely had aspirations to learn from the great estates,” said Robert Evans, director of Argent, which says it will prevent some retailers in its Kings Cross development from selling on leases and restrict changes made to shop fronts and signs, rules typical of estates like Cadogan and otherwise laid down by local authorities.
In all, the city’s 12 regeneration sites cover more than 50 million square feet of houses, shops and offices, the equivalent of 670 s o ccer pitches. It’s the highest number of large schemes on record, said global property consultancy CBRE’s (CBG.N) head of London research Kevin McCauley.
Most were drawn up with political backing in the boom before the 2008 financial crisis and also took inspiration from the 97-acre Canary Wharf financial district. The forest of glass and steel skyscrapers, completed on previously derelict docklands in 1991, is home to Citigroup (C.N), HSBC (HSBA.L), JP Morgan (JPM.N) and other financial heavyweights.
The economic downturn contributed to the flurry of schemes all coming at the same time, said Michael Marx, chief executive of Development Securities DSC.L, which developed a 1.6 million square feet project in Paddington, west London, alongside insurer Aviva (AV.L), as part of a wider scheme.
“Economic stagnation is good for regeneration projects as local authorities are less inclined to put obstacles in the way of developers,” he told Reuters, referring to the often arduous British planning system.
Argent is courting Google (GOOG.O), to take 725,000 square feet of office space for its UK headquarters in King’s Cross, a former fish, coal and grain goodsyard, a deal that would boost rents as others scramble to be neighbours with the Internet search giant.
“These types of deals are very important as tenants are not exactly swanning around at the moment,” said Marx. “Placemaking is where good developers can make even more money.”
Editing by Tom Bill and Sonya Hepinstall