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
Arts and Entertainment
Lou Reed distorted the truth about his upbringing, and since his death in 2013, biographers and memoirists have added to the myths
musicThe truth about Lou Reed's upbringing beyond the biographers' and memoirists' myths
News
people
News
Ed Miliband received a warm welcome in Chester
election 2015
Life and Style
Apple CEO Tim Cook announces the Apple Watch during an Apple special even
fashionIs the Apple Watch for you? Well, it depends if you want it for the fitness tech, or for the style
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own