Two of Britain’s top property groups are spending almost £700 million on West End developments, placing major bets on the success of Crossrail.
British Land is paying £470 million to buy most of the buildings and development sites in Paddington Central — the area just north of the mainline station which is home to Astra Zeneca, Nokia and Statoil.
At the same time Mike Hussey’s Almacantar is reported to be the lead candidate to buy 125 Shaftesbury Avenue, a shops and offices block in the West End, for £120 million which has the potential for major redevelopment.
Paddington Central will see a Crossrail station open in 2018 and a new Hammersmith & City Line station open next year, while the Shaftesbury Avenue building is 200 metres from the Tottenham Court Road Crossrail station.
British Land is buying three existing buildings including two office blocks and a Novotel, another two development blocks which total 335,000 square feet and an adjoining square with shops and bars. They all lie in a triangle between the railway lines, Westway and Grand Union canal.
The main seller is insurance giant Aviva with other investors including the Irish “bad bank” NAMA.
Chris Grigg, chief executive of British Land, said: “This is an investment which plays to our asset-management and development strengths, is in line with our strategy of increasing exposure to London and replenishing the development pipeline, and one we expect to generate strong returns.”
He added that this is the biggest acquisition by British Land since it raised £493 million through a share placing in March and that it would boost earnings earlier than expected next year. The deal also further reinforces British Land’s gradual rebalancing of its portfolio from its City roots in Broadgate to a wider London, and particularly West End, focus.
Rentals on the current Paddington Central offices average £49.50 a square foot against a West End average of up to £70.
Grigg said: “With Crossrail still five years out its potential is being recognised by investors but not yet in the rents which tenants are prepared to pay. As it moves closer that will change.”
Investment manager BlackRock has chosen Almacantar as its preferred bidder for the 190,000 square foot block on Shaftesbury Avenue which includes Yahoo as a tenant.