Property: Warehouse flats come of age

The man who bought an Eighties pad for pounds 45,000, could now sell it for 20 times as much.

A few weeks ago a resident of Shad Thames recalled how he came across his flat in the Eighties. He walked into a warehouse that was a pile of rubble, chose a two-bedroom flat off the plans and shook hands with the developer on the spot. Even though the agreed pounds 45,000 was underpriced by the time it was finished, the builder honoured the deal that amounted to little more than a gentleman's agreement.

Unusual anywhere, but particularly in an area that has become one of the smartest spots on the Thames. Just round the corner from that flat is Butler's Wharf, probably the most famous warehouse on the river, where prices are setting new records. Revamped and revitalised, a two-bedroom apartment in this listed building overlooking Tower Bridge is about 20 times the figure agreed on a handshake some 15 years ago.

It is hard to recall that something of a pioneering spirit was needed then, that even those who made a modest investment in a property had their faith severely tested during the recession when Docklands prices fell sharply. The most influential investor was, of course, Sir Terence Conran who put the area on to the map with the Pont de la Tour restaurant complex and encouraged shops, galleries and developers to follow in his wake.

It is an irony that his Butler's Wharf company collapsed at the end of the Eighties before the homes were sold, and were let out by its new Danish owners before being bought by the Prestbury Group earlier this year. The group's refurbishment turned into a radical refit that's transformed the flats with an architectural flair that will see them well into the 21st century.

Any loss of old warehouse ambience is compensated by the clever use of space. Light from front and back windows is unobstructed. At the touch of a button, panels can close off the main living room from a wide corridor, part of which can itself be enclosed to make an extra bedroom. At the front of the living room, overlooking Tower Bridge, a raised platform alongside a hinged window that hooks out of the way, brings the feel of alfresco eating under cover. Bathrooms have the distinctive Philippe Starck- designed fittings.

Design and location command high prices and a one-bedroom flat is from pounds 425,000, and a two-bedroom pounds 850,000. "You are paying for the best-known warehouse location in London," says Tom Marshall of Cluttons Daniel Smith. "Americans ask to go there even if they don't know what it is."

In the past few months he has seen an enormous demand for riverside homes, a very different picture from the middle of the year. "Good quality apartments are selling amazingly well and now there is a shortage in the most popular areas. Anything on the river between Wandsworth and Tower bridges and you can expect to pay premium prices." Close to the Tower that means pounds 400 to pounds 550 a square foot, whereas further from the prime sites and in buildings without a river view pounds 300 to pounds 350 is more usual.

The search for a village atmosphere drives the market much as it does anywhere in Britain. According to Yolande Barnes, head of research at FPD Savills, it is this as much as its views over Tower Bridge that makes Shad Thames stand apart. "Owners there are reaping the benefit of what Conran put in. He planned the infrastructure: it is far more successful than the piecemeal incremental refurbishment of warehouses we saw at Wapping. Value wise they are on a par, even though Shad Thames is south of the river."

Until now Docklands was lagging behind the rest of London, but with the extension of the Jubilee line and demand for new high-spec homes, the focus has shifted eastwards. Russell Taylor of FPD Savills still believes it is undervalued. "Consider how much further pounds 600,000 or pounds 700,000 will go than in Kensington. This is not lost on buyers, and I've sold 12 properties at pounds 1m plus this year against seven in the previous 10 years. But we do need to see some more restaurants and small shops. Wapping's crying out for them."

Until recently when the inevitable concerns about schooling came to bear, he and his family were living in Limehouse. "It is peaceful and surprisingly good for small children. And more people are staying here during weekends which makes it far more lively and appealing. There is so much demand that we have only two new apartments for sale overlooking the river at present."

At St Katherine's Dock, Taylor Woodrow's City Quay development has just sold out. Two-bedroom apartments sold for pounds 420,000 to pounds 520,000, rising to pounds 700,000 for a three-bedroom penthouse and upwards of pounds 900,000 for a duplex penthouse. Price per square foot is around pounds 450. But despite its location, St Katherine's has failed, as one resident put it, to shine as brightly as it might have done, and hasn't the appeal of Shad Thames over the water.

Tom MacQuillan, of Taylor Woodrow, believes their plans to replace the "grey, grotesque and uninspiring Europe House" - with a Richard Rogers design to include retail and office space will draw many more people in.

The arrival of the Jubilee line was always the point at which many pundits predicted that Docklands might start to look more attractive than Putney or Fulham as good quality flats with long leases, river views and parking draw disaffected owners away from the traditional residential areas. As new sites become scarcer, British buyers, normally slow to buy off plan, are prepared to put their money down on a home in a prime spot.

Further west, at Parliament View, the strikingly modern, curved building emerging on the south side of Lambeth Bridge, saw queues of buyers from all parts of the UK during its launch. Our of the first phase of 138 apartments, 108 have been sold with prices starting at pounds 189,500 for a one-bedroom flat.

But increasingly, the most successful new quarters of London are being sold with a lifestyle attached and the integration of hotels, cinemas, shops into residential schemes, such as Canary Riverside, are their guarantees for the future. At Shad Thames, the man who who picked his flat out from the rubble had no idea that his investment was being secured by Conran.

Butler's Wharf via Hamptons 0171 824 8822, and Aylesford 0171 351 2383. FPD Savills, Wapping, 0171 456 6800; Parliament View, 07071 772222

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