Five-star treatment for offices

SOME of London's best-known office buildings - including the City's second tallest skyscraper - may be turned into hotels. Britannic Tower, the 35-storey former BP headquarters close to the Bank of England, has been bought by City Development Management, which is studying the conversion of its upper floors into a luxury hotel.

This, along with at least seven other actual or planned conversions, is part of a new trend that office estate agents hope will cure a mismatch of supply and demand in the capital. Many of them have been hawking tired office buildings around the market, and have had little luck stirring interest. Hoteliers, however, are short of rooms. Foreign tourists, attracted by favourable exchange rates, are coming to London in their droves, and are putting pressure on the capital's limited luxury accomodation.

Last week Knight Frank and Rutley awarded 1 Curzon Street, Mayfair - the former MI5 headquarters - to Development Securities. But one of the four bids shortlisted was a proposal by Japan Airlines to convert the prestigious address into a hotel.

"There is an undersupply of [hotel] rooms of the right quality in central London," says Robert Chess, director of Chesterton's licensed leisure and hotels division. "The decline in the office market and the keenness of hoteliers to buy new sites - sites they can at last afford - has led to a significant new trend."

While office values have plummeted in the past few years, hotels have maintained or increased their value. Some hotels produce as good a return per square foot as offices. But for some hoteliers, funding conversion projects has has been difficult. Institutional investors are chary of putting their money into an unfamiliar area. "Usually the hotel operator will fund it themselves," says Jonathan Hubbard, an associate in the hotels and leisure division of Weatherall, Green & Smith.

Some agents think that if funds were more aware of the market, deals would be even more abundant. "The phenonemon of hotel conversions doesn't seem to have caught the imagination of the funds to the extent it should," one hotel agent says.

How long the trend continues depends on how soon the second-hand office market recovers. "We're seeing a lot of action now, but I don't know whether this is a long-term phenomenon," Mr Chess says. "When the new office buildings around central London come onstream in1996 and 1997, prices may rise too high for this level of hotel investment." Even though extra supply normally depresses prices, the arrival of a raft of high-quality buildings could have the opposite effect.

A host of conversion proposals has now been made. A Malaysian group wants to convert the former Pearl Assurance headquarters at 252 High Holborn into a four-star hotel. Investor-developer Ringfield has paid AMP Asset Managers between pounds 12m and pounds 13m for the property, and aims to change the planning consent to convert it to a 300-bedroom hotel.

Although 74 St James's St, just behind The Ritz, is under a pounds 21m offer for an office scheme from Pillar Property Investments, the buildings agent Hillier Parker has confirmed that an overseas hotel operator has now expressed interest.

Sir Terence Conran and hotelier Gordon Campbell-Gray are about to buy the 1920s Inveresk House in Aldwych from Prudential for about pounds 12.5m, and have plans for a five-star hotel with 120 bedrooms. Land Securities has applied for planning permission to convert its Turnstile House in High Holborn into a hotel, and is understood to have agreed to sell it for around pounds 6m to the French group Orion, which wants to establish an apartment-style hotel.

The City, which has never had more than a handful of hotel rooms, could get two new hotels. As City Development Management is negotiating the pounds 35m purchase of Britannic House with BP, National Westminster Bank and MEPC are considering the conversion of part of the bank's Draper's Gardens office building in Throgmorton Avenue. Whether this goes ahead depends on whether NatWest decides to put staff back into its tower, which was damaged by a bomb in 1993.

q David Parsley is a writer for 'Property Week'.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Sport
Kim Sears is reported to have directed abuse at Berdych
tennis
Arts and Entertainment
Cold case: Aaron McCusker and Christopher Eccleston in ‘Fortitude’
tvReview: Sky Atlantic's ambitious new series Fortitude has begun with a feature-length special
Voices
Three people wearing masks depicting Ed Miliband, David Cameron and Nick Clegg
voicesPolitics is in the gutter – but there is an alternative, says Nigel Farage
Voices
The veterans Mark Hayward, Hugh Thompson and Sean Staines (back) with Grayson Perry (front left) and Evgeny Lebedev
charity appealMaverick artist Grayson Perry backs our campaign
News
i100
News
people
ebooks
ebooksA special investigation by Andy McSmith
Sport
Chelsea manager Jose Mourinho
footballThe more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Life and Style
Vote green: Benoit Berenger at The Duke of Cambridge in London's Islington
food + drinkBanishes thoughts of soggy school dinners and turn over a new leaf
News
Joel Grey (left) poses next to a poster featuring his character in the film
peopleActor Joel Grey comes out at 82
News
i100
News
business
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Recruitment Genius: Technical Report Writer

£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...

MBDA UK Ltd: Indirect Procurement Category Manager

Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee