Carnaby - H2so.com

Issue 2 Q2 2013
MORE THAN
Smoke And
Mirrors
The new
Wellesley
hotel
THE SILVER LINING
A BRIGHT FUTURE
FOR HMS BELFAST
Carnaby
IT’S NOT JUST ABOUT THE SHOPS
making the
crossrail
connection
Great
Portland
Estates
H2SO.COM 1

welcome
020
Welcome to the latest
issue of 020. Over the
centuries, London has
moved forward in bursts of
cultural and commercial
development…
H2SO founding partners (l-r):
David Hanrahan, Rob Hayes, Paul Smith and John Olney
The Georgians expanded the city
westward; the Victorians tamed
the Thames and built the great
public buildings that characterise
so much of the Capital. The
“Swinging” 1960s embodied by
Carnaby Street ushered in new
personal freedoms – and an
explosion of development.
We believe that London now
stands on the verge of another
great leap forward. Crossrail
is emblematic of how our Capital
city will be transformed during
the next decade. Whether it’s the
preservation of the historic or the
shock of the new, we think there
are many reasons to be excited
about London right now.
We hope you enjoy this issue of 020
and would be delighted to hear
any comments you may have.
“Crossrail is one of the biggest
infrastructure projects in
London’s history, and a vivid
example of the capital’s
evolution” See page 04
A Crossrail tunnelling machine is lowered into place at Tottenham Court Road

Walk down Carnaby Street and around Given the retail presence in the area, it’s The broadening base of occupiers
the network of streets that lie between not surprising that Shaftesbury’s retailers includes financial giant, Blackstone,
Regent Street and Soho and you will find a are also strongly represented amongst which has taken space in Shaftesbury’s
fantastic range of shops, restaurants and their office occupiers. Kirk reports: new 36 Carnaby Street development.
bars. But what is less obvious at first sight “Our offices have always appealed to
is that the area is also home to a thriving our retailers. A lot of them have office Ed Betts of H2SO – who are the leasing
– and growing – office community.
showrooms above their shops so trade agents for Carnaby offices with Cushman
buyers can come to the shop, see the & Wakefield – comments: “For a long time
The iconic Carnaby Street and the
product on sale, and then go upstairs, the offices in the area were almost like a
12 streets that surround it are all owned see next year’s range and discuss buying. well-kept secret, but since Shaftesbury
by Shaftesbury PLC – and are home
took control and began repositioning the
to more than 230,000 sq ft of offices. “Retailers like the proximity because office product, it has become one of the
If you pass through the front doors it means that buyers don’t have to most desirable areas in the West End.
that punctuate the shop fronts, you will trail off somewhere else to continue
find office suites on the upper floors the business conversation.”
“It was always popular with the broadcast
occupied by a myriad of businesses.
and creative sectors but we’re now also
The area has also been a preserve for film seeing it attract all types of businesses,
Having transformed the Carnaby retail, post-production companies; the most including financial occupiers, who love
food and leisure offer, Shaftesbury has notable probably being Molinare. More the eclectic mix”.
also carried out a quieter revolution with recently Carnaby has also attracted PR
its office holdings and now has plans to companies, financial institutions, creative Shaftesbury is focused on engendering an
create more space to meet the growing agencies and the specialists that serve integrated community of all the businesses
demand in the area.
the burgeoning digital and online world. in the village.
Occupiers are drawn by the buzz of the
Rob Kirk from Shaftesbury who is location – and its favourable rental profile. Kirk comments: “It’s a different estate to
responsible for Carnaby Village offices
anywhere else. We have the advantages
comments: “Our offices range from Carnaby rents are very competitive of the retail and the restaurant elements
150 sq ft – pretty much enough for one compared to rents on similar space west as an area. We try to work it as a village.
person – through to floors of 4,000 sq ft. of Regent Street. Top rents for new space We have our own 24/7 security. We have
at Carnaby have touched £65 per sq ft our own estate cleaning; we do our own
“The average floorplate is 1,300 sq ft, compared to rents of over £100 per sq ft in Christmas decorations. We have our own
but we have a multitude of small offices.” Mayfair, but the bulk of the space is currently estate managers.”
let at an average rent of around £47 per sq ft.
Opposite: Decorations on Carnaby Street celebrating the Rolling Stones’ 50th anniversary
12 020 ISSUE 2 Q2 2 0 13 H2SO.COM 13
On November 29th 2011, Phil Reed left his redevelopment of the quayside ticket offi ce leases for 75-year old warships on the Thames”.
offi ce on board HMS Belfast and crossed into a café, shop, admissions area and
However, there are now lease agreements in place
the walkway that connected the ship to the fashionable roof-top bar. While it was hardly the which, as Reed puts it, will essentially apply as
south bank of the Thames. The Imperial War circumstance in which Reed would have wanted long as the Belfast is moored on the river.
Museum Director with responsibility for the to proceed with the works, he points out that
warship tourist attraction was heading for a the silver lining is that it hastened work which The new £2m visitor centre was completed
meeting in the West End, but before he had will be a long-term benefi t for the attraction. at the turn of the year and Reed is excited by
reached that appointment the entire walkway
the contribution it will make.
he had just crossed crashed into the Thames. “The previous building was put up as a
temporary structure more than 20 years ago “We wanted to redevelop to make more of it.
He recalls: “We had decided to restore the and actually belonged to St Martin’s Property It will be more welcoming to people than the old
brow – most people would call it the gangplank Corporation, which has substantial ownerships structure. It’ll make clear the ship is a place to visit
– which enabled visitors to get aboard from along this Southbank stretch of the Thames. – and it will help generate much needed income
Queen’s Walk. We’d been doing restoration on
to sustain the long-term future of the ship.
its three separate sections and that day were “The other relevant party to getting the project
working on the oldest section closest to the ship. off the ground was the Port of London Authority Although the ship is a designated National
who basically control all moorings and access Museum it does not get any Government
“The contractors were actually getting very points on the Thames.”
funding so the Imperial War Museum has to
close to fi nishing the job when someone
subsidise, and the ship has got to earn its keep.
inadvertently sawed through some metal Reed brought in Felix Fiennes of H2SO to After the opening of the new quayside building,
work that they shouldn’t, and that was that.” negotiate new leases with St Martin’s and the the aim is for the attraction to be fully paying its
PLA so that the future of Belfast’s mooring and way within fi ve to 10 years.
The result was that the unique attraction was visitor centre would be secured. It was an unusual
closed for six months, but the misfortune and sometimes complex process. Fiennes points Prior to the brow collapse, around 250,000
precipitated an already planned-for
out: “There’s not much precedence for negotiating people had been visiting the ship each year.
H2SO.COM 25
Contents
Re-make,
re-model:
a Soho story
Our cover shows the December 2012 decorations
on Carnaby Street which celebrated the Rolling
Stones’ 50th anniversary of rocking
Connecting
with Crossrail
Much more than
smoke & mirrors
04
Connecting with Crossrail
Great Portland Estates’ Toby Courtauld and
Neil Thompson talk about what Crossrail will
mean to London
08
Much more than smoke & mirrors
London has a new luxury hotel – and one
of the world’s great cigar collections.
020 spoke to the man behind both
12
Carnaby
It’s not just about the shops
Carnaby Street will always be associated
with fashion and great shopping but it’s
also home to a lot of offices
CARNABYW1
IT’S NOT JUST ABOUT THE SHOPS
A GROWING NUMBER OF BUSINESSES ARE CHOOSING ONE OF
THE WORLD’S MOST ICONIC SHOPPING LOCATIONS TO BASE
THEIR OFFICES. DUNCAN LAMB FOUND OUT WHY…
16
Turning the tables: Graham Ruddick
We turn the tables on the Daily Telegraph’s
Graham Ruddick to find out what makes
him tick
18
Re-make, re-model: a Soho story
It used to be home to the Football Association
but now 25 Soho Square is one of the most
stylish buildings in the West End
24
A bright future for HMS Belfast
Disaster has been turned to triumph
at one of London’s most iconic
tourist attractions
You can’t just
present a ship,
you need
much more
interpretation
Phil Reed, Museum Director
HMS Belfast
28
London Rocks
Can you name where the album covers
were shot and win some fizz?
30
020 Real Estate
News and commentary from London’s
T office market H E
S I L V 30: News E R
LINING Deals, developments and intelligence
WHEN THE WALKWAY CONNECTING HMS BELFAST TO THE SOUTHBANK
OF THE THAMES COLLAPSED, IT CLOSED THE HUGELY POPULAR TOURIST
ATTRACTION FOR SIX MONTHS. BUT SOME GOOD HAS COME FROM THE
CALAMITY AND SIGNALLED A BRIGHTER FUTURE FOR THE WARSHIP.
The Market
35: Office Agency
36: Investment
37: Lease Advisory
33
The ‘Lost Offices’ of London’s West End
The latest research on the office-to-residential
conversion trend
2 020 Issue 2 Q2 2013 H2SO.COM 3

“We are big believers in
Crossrail; it is going
to be a major catalyst
for change.”
Toby Courtauld GPE
CONNECTING
CROSSRAIL
Great Portland Estates is one of London’s
leading property developers. It is also positioned
to benefit from the biggest infrastructure
project in the Capital’s history. Duncan Lamb
spoke to the company’s chief executive and
portfolio director about the importance of
making the Crossrail connection.
WITH
When calculating the likely usage of a
train or underground station, Transport
for London analyses an 800-metre
catchment area around each location.
Great Portland Estates currently
has 17 development projects either
underway or planned in London and
more than 80% of the floorspace that
these schemes create will be within
800m of a new Crossrail station.
So the correlation between GPE’s
3.5m sq ft development programme
and the major transport benefits
that Crossrail will deliver is clear.
When talking to the company’s Chief
Executive, Toby Courtauld, and its
Portfolio Director, Neil Thompson, the
conversation soon turns to Crossrail.
Courtauld points out: “The reason we
think Crossrail is so significant is not
just that it will improve the Capital’s
transport infrastructure but also
that it will increase London’s railway
capacity by 10%. That is a huge
proportion. Not only is it big in terms
of number of passenger movements
but it’s also where those people are
being taken to that’s significant.
“For the first time ever you will have
the situation where people are getting
on trains in the outskirts of London
and beyond and coming right in to
the West End. The linkage of the four
main commercial areas in London –
Canary Wharf, the City, the West End
and Heathrow – by a single railway is
almost unique in the world. We are
big believers in Crossrail; it is going
to be a major catalyst for change.”
Crossrail is the biggest engineering
project in Europe and will connect
37 stations, including Heathrow
Airport and Maidenhead in the west
with Canary Wharf, Abbey Wood and
Shenfield in the east. Its aim is to
make travelling in the region easier and
quicker, and help to reduce crowding
on London’s transport network. It will
place an additional 1.5m people within
a 45-minute commute into London.
For many years, the project seemed
a pipe-dream and even when it was
given the go-ahead some observers
feared that the recession would
curtail or compromise the scope of
the scheme. However, Courtauld and
Thompson have absolute confidence
that it will be delivered.
Six years of shrewd buying around
Hanover Square – where the eastern
entrance of the new Bond Street
Crossrail station will be located – has
seen GPE assemble a development
site which will enable the company to
build more than 200,000 sq ft of offices
together with shops and apartments.
Perhaps the best illustration of the
potential of combining a large scale
development site in the West End in
close proximity to a Crossrail station
is that by March 2012, the Hanover
Square holdings were the company’s
best performing assets showing a
37% uplift in value.
However, work on the project will
not be possible until 2015 when
the Crossrail station builders are
finished in the square. In the nearer
term, the focus switches to another
project which GPE expects to feel
the Crossrail halo effect.
In September 2011, the company
paid Royal Mail £120m for a 2.3-acre
site on Rathbone Place just north of
Oxford Street. The site is a short walk
from the new Tottenham Court Road
underground/Crossrail interchange
station. It came with a planning
consent for a development providing
380,000 sq ft of offices, residential
^
4 020 Issue 2 Q2 2013 H2SO.COM 5

“London does have this incredible ability to evolve but
also hold on to what is special about it.” Toby Courtauld GPE
Clockwise from top left / CGI of pedestrian square linking Bond Street to Hanover Square / CGI of new Tottenham Court Road entrance
/ Tunnel eyes at Royal Oak Station near Paddington / Construction underway at the Dean Street ticket hall which will serve Tottenham Court Road station
and retail together with substantial public
realm improvements and a pedestrian
square connecting Newman Street through
to Rathbone Place and Charlotte Street.
However, Courtauld and his team are
now reworking the development vision.
Neil Thompson reports: “We’ll get vacant
possession in June this year and will have
submitted a new planning application
before that.
“Demolition will be complete in the early
part of 2014, and construction takes us
through to 2016. The first building should
be delivered in the first half of that year.”
This will be two years ahead of the 2018
best-case scenario for the completion of
Crossrail, but the duo believes that by
that time the market will be alive to the
benefits that Crossrail will bring. Thompson
observes: “Even at this early stage, we are
thinking not only about how the scheme
will relate to its location but also how it
will integrate with Crossrail: thinking about
the pedestrian routes across the site,
orientation of the buildings, etc”.
In terms of its potential, Courtauld believes
the area encompassing Rathbone Place
and the eastern end of Oxford Street to be
“the most exciting in London right now”,
and is clearly aware that it presents a
“placemaking” opportunity which is
above and beyond any of the schemes
that GPE has delivered to date.
“This is a piece of land that just about
everybody in the property game has looked
at for as long as you can remember, and all
said that one day something exciting has
to happen,” he says.
“It’s one of those rare opportunities: the
quality of the location, the ability to take
what is basically virgin land and create
very high quality space off a base cost
that gives you options.”
The GPE Chief Executive sees what is
happening in this corner of the Capital
as emblematic of London’s constant
reinvention.
“I grew up in Asia so I’m used to seeing
an environment change far more rapidly
than London does, but London does have
this incredible ability to evolve but also
hold on to what is special about it.
“It’s one of the things that people love
about London – its elegance, its heritage.
These are the characteristics that attract
people from around the world to visit,
work and live.”
Homes will be a substantial component
of the scheme but, although the Capital’s
residential market is arguably the hottest
it has ever been, the developer is not
getting carried away with Rathbone
Place’s potential.
“For us to go and chase residential
values which are £3,000-£4,000 per
sq ft would be the wrong thing to do,”
says Thompson.
“What we are looking at delivering is
aimed at the mid-market bracket: making
sure that we get the quality right, the
layout right and the specification right,
to ensure that we deliver good quality
units that the market wants.”
The site acquisition price reflected a
base cost of £313 per sq ft which – even
allowing for substantial development and
infrastructure costs – should give GPE
some elbow room to do something special
with all the component parts of the project.
Courtauld does not seem fazed by the
broader canvas on which Rathbone
Place will be created: “We have done
public realm projects on a small scale
and we have also done them on a much
bigger scale. A good example is the
Kent House project we did near Great
Titchfield Street. GPE joined forces with
Westminster; both of whom put some
money in to improve the experience for
shoppers and restaurant users around
Market Place and the immediate vicinity.
“We did a similar thing in Portman Square
where we joined forces with the Portman
Estate, British Land and others to improve
the pedestrianisation around the square.
Rathbone Place will be on a different scale
but it’s the same basic concept.”
Continuing on the theme of partnership,
he also does not rule out working with a
funding partner – “it is sizeable and we
may look to bring in third-party capital to
help us deliver it – but before that there
is much to do. You have got to start off
on the right footing.”
Creating major office developments within
walking distance of a transport system
that will carry 200m passengers every
year seems like a good place to start.
More information at: gpe.co.uk
and crossrail.co.uk
6 020 Issue 2 Q2 2013
H2SO.COM 7

Much more than
smoke &
mirrors
Is it a hotel or the most luxurious, beautifully
designed cigar box in the world? 020 headed to
Knightsbridge to find out more about the new
Wellesley Hotel and the man behind it, Khalid Affara
Khalid Affara loves creating
buildings and he loves cigars.
So, The Wellesley – the new hotel
he has opened on Knightsbridge –
is a perfect convergence of these
two passions.
Affara has been closely involved
in the City & Country Hotels
development since its inception.
It provides everything you
would expect and more from
London’s latest five-star hotel,
but at its heart is the biggest
cigar humidor in the world, and
in that humidor is around £1m
worth of the finest cigars.
It is a collection that has been
painstakingly assembled by Affara
through years of selective buying
plus numerous visits to Cuba and
the country’s producers of the
finest cigars.
“It is the best cigar collection ever
opened up to be sold,” reports
the man who is best known in the
London property scene as the boss
of Arab Investments. “It’s taken
me longer to build up the cigar
collection than it has to build the
hotel,” he adds laughing.
“The best cigars come from a
very specific place in Cuba called
Pinar where everything is right:
temperature, humidity, light,
soil. People have tried taking
the tobacco plants and growing
them elsewhere but it just doesn’t
produce the same quality.”
The Wellesley humidor – a
meticulously designed room
with stunning high gloss lacquer
walls – is able to store up 20,000
“sticks” as Affara refers to cigars in
collector’s parlance. The humidor
provides private “keeps” – optimum
environment storage in which
individuals can store the cigars
they have bought from the hotel.
For the best and rarest cigars, you
can pay around £3,000 a “stick”, but
Affara believes that it is personal
taste which counts rather than retail
value. It was about 10 years ago that
he was introduced to the pleasures
of cigar smoking by a friend and
soon became an aficionado.
“A friend of mine smokes cigars and
he kept saying ‘Have a smoke, have
a smoke’. So I had a cigar and it was
very enjoyable. But I understood
very early on that it’s not just the
actual smoking which makes it a
good experience: you have got to
get everything right.
“You’ve got to be in a good mood,
have good company. Perhaps you’ve
just had a beautiful meal. And then
at the end of the evening you find
yourself saying – not just that the
cigar was great – but the whole
evening was great. You sit down,
you talk; you laugh and have a
great time.
“Ultimately, you maybe don’t
remember the cigar you smoked,
but you remember the whole
evening and how great it was.”
This is very much the philosophy
he is bringing to The Wellesley.
“The Wellesley is something that I
have been passionate about and
I am putting a lot of myself into it.
I wanted to create something that
I can say: ‘OK this is what I am
looking for in a hotel. This has got
everything that I would want in
a hotel’. Hopefully other people
will feel the same way.”
He recounts a story of being in one
of the best hotels in Cannes and
wanting to eat – and also smoke
a cigar: “They told me I could eat
in the dining room but not smoke
there – or I could smoke out on the
terrace but not eat!”
At The Wellesley there is a terrace
where you can both eat and smoke,
but it would be wrong, to portray
the hotel as being aimed solely at
the cigar-smoking cognoscenti.
The 36-bedroom hotel has been
created out of the old Pizza on the
Park building facing Hyde Park
where, coincidentally, Affara used
to have his office on an upper floor.
Aside from the quality of the
interior, the man behind it is
most focused on the service
that the hotel provides.
8 020 Issue 2 Q2 2013 H2SO.COM 9

“It is the best cigar
collection ever opened
up to be sold. It’s taken
me longer to build up the
cigar collection than it
has to build the hotel”
“It’s a five-star hotel but I want to
provide six-star service,” he states
emphatically.
“If people start complaining about
service then we haven’t succeeded.
It’s all about the service. It’s all
about what the customer wants
and how we are going to keep
the customer happy.
“We want it to feel like home
when you’re in London. Every room
comes with butler service. Every
room comes with its own mobile
phone: people can call you at The
Wellesley and we will transfer that
call anywhere in the UK directly on
to your phone. It’s not going to cost
you anything. If you want to make
a local call it’s free of charge, and if
you want to make an international
call well then that’s even cheaper
to make it from your Wellesley
phone than it is to make the call
from your normal mobile phone.”
Affara realises that to deliver great
service you have to incentivise the
staff and, for this reason, all service
charges go straight to the staff and
are divided between all the different
areas of the hotel: front of house,
restaurant, bars etc.
“When you have a customer
maybe staying on until 5am and
the bill for the whole night is going
to be £10-£15,000, the staff will go
that extra mile because they know
that they will directly benefit from
the service charge that will come
from that.”
There is fine dining in the Oval Room
restaurant and music in the Jazz
Room which both stay open until
3am. The Crystal Bar has a “Whisky
Wall”, the oldest bottle of cognac
in London (dating from 1770) and
a massive crystal chandelier which
weighs more than 1,000lbs.
The opening of The Wellesley will
inevitably put Affara in the spotlight,
but although he is an influential figure
on the London property scene, he
does not court publicity. Born in
Yemen and brought up in Scotland
after his family moved there when he
was nine, he graduated in business
studies at Nottingham University
with an MBA and started in the family
property investment business as soon
as he left college 20 years ago.
Arab Investments is well known for
the large scale buying and selling
of property, but it is development
which Affara personally enjoys most:
“I get so much more pleasure from
building. So much more.
“You are creating something, you are
leaving something behind. You drive
by one day and can say ‘I built that’.
I get a much bigger buzz from that
than the trading side.”
London is the focus of the
company’s activities – it has just
finished projects in the Square
Mile at Gracechurch Street and
Gresham Street, but is also currently
developing a 2m sq ft shopping mall
in the centre of Berlin.
The Wellesley is his second hotel
development in London – he was
also behind the 10 Manchester Street
boutique hotel, and there are plans
underway for creating a high quality,
more family-orientated country clubstyle
hotel at Langley in Berkshire.
“It will have one of the biggest spas
in the UK,” he reports. “It will be
geared up for families on Sundays
so you can come and spend a
whole day by the pool, have a
barbecue and just relax. It’ll be
a fantastic wedding location –
there’s a huge fountain which will
make a tremendous backdrop.”
But for the moment, his whole focus
is on The Wellesley which opened its
doors in December ahead of a grand
opening. He apologises for bringing
the interview to a close but is due to
be at The Wellesley: “If you want to
get everything right,” he says, “you
have to be completely involved”.
More information at:
www.thewellesley.co.uk
“It’s a five-star hotel but I want
to provide six-star service”
10 020 Issue 2 Q2 2013 H2SO.COM 11

CARNABYW1
It’s not just about the shops
A growing number of businesses are choosing one of
the world’s most iconic shopping locations to base
their offices. Duncan Lamb found out why…
Walk down Carnaby Street and around
the network of streets that lie between
Regent Street and Soho and you will find a
fantastic range of shops, restaurants and
bars. But what is less obvious at first sight
is that the area is also home to a thriving
– and growing – office community.
The iconic Carnaby Street and the
12 streets that surround it are all owned
by Shaftesbury PLC – and are home
to more than 230,000 sq ft of offices.
If you pass through the front doors
that punctuate the shop fronts, you will
find office suites on the upper floors
occupied by a myriad of businesses.
Having transformed the Carnaby retail,
food and leisure offer, Shaftesbury has
also carried out a quieter revolution with
its office holdings and now has plans to
create more space to meet the growing
demand in the area.
Rob Kirk from Shaftesbury who is
responsible for Carnaby Village offices
comments: “Our offices range from
150 sq ft – pretty much enough for one
person – through to floors of 4,000 sq ft.
“The average floorplate is 1,300 sq ft,
but we have a multitude of small offices.”
Given the retail presence in the area, it’s
not surprising that Shaftesbury’s retailers
are also strongly represented amongst
their office occupiers. Kirk reports:
“Our offices have always appealed to
our retailers. A lot of them have office
showrooms above their shops so trade
buyers can come to the shop, see the
product on sale, and then go upstairs,
see next year’s range and discuss buying.
“Retailers like the proximity because
it means that buyers don’t have to
trail off somewhere else to continue
the business conversation.”
The area has also been a preserve for film
post-production companies; the most
notable probably being Molinare. More
recently Carnaby has also attracted PR
companies, financial institutions, creative
agencies and the specialists that serve
the burgeoning digital and online world.
Occupiers are drawn by the buzz of the
location – and its favourable rental profile.
Carnaby rents are very competitive
compared to rents on similar space west
of Regent Street. Top rents for new space
at Carnaby have touched £65 per sq ft
compared to rents of over £100 per sq ft in
Mayfair, but the bulk of the space is currently
let at an average rent of around £47 per sq ft.
The broadening base of occupiers
includes financial giant, Blackstone,
which has taken space in Shaftesbury’s
new 36 Carnaby Street development.
Ed Betts of H2SO – who are the leasing
agents for Carnaby offices with Cushman
& Wakefield – comments: “For a long time
the offices in the area were almost like a
well-kept secret, but since Shaftesbury
took control and began repositioning the
office product, it has become one of the
most desirable areas in the West End.
“It was always popular with the broadcast
and creative sectors but we’re now also
seeing it attract all types of businesses,
including financial occupiers, who love
the eclectic mix”.
Shaftesbury is focused on engendering an
integrated community of all the businesses
in the village.
Kirk comments: “It’s a different estate to
anywhere else. We have the advantages
of the retail and the restaurant elements
as an area. We try to work it as a village.
We have our own 24/7 security. We have
our own estate cleaning; we do our own
Christmas decorations. We have our own
estate managers.”
Opposite: Decorations on Carnaby Street celebrating the Rolling Stones’ 50th anniversary
12 020 Issue 2 Q2 2013 H2SO.COM 13

“It’s a different estate
to anywhere else…
We try to work it as
a village”
Rob Kirk, Shaftesbury PLC
Pictured outside 36 Carnaby Street
“That feeds into how we market the offices:
that it’s managed as a community. Whether
it’s linking the retail to the restaurants, or
the flats or the offices we try and make
sure they are a community.”
Anyone who works in Carnaby Village
as part of a business that pays rent to
Shaftesbury – whether they are a CEO or
a kitchen porter – gets a loyalty privilege
card which gives them 10% off in most
of the shops and restaurants.
“We have about 4,000 cardholders at
present, but if you’re in the village there
are a lot of unstated benefits which that
brings. If you get a coffee in the same
place every day and the staff know you,
you’ll probably get the occasional freebie if
you are a regular customer. That’s quite a
rare thing in central London and you get it
at Carnaby because of the village feel.”
To suit the type of occupiers that are
attracted to the area, Shaftesbury aims to
keep leases flexible and straightforward. Kirk
explains: “We have many inclusive leases so
tenants know exactly what they have to pay
to us and they don’t have a service charge
to worry about. Covenant strength is not the
main priority in a letting to us, unlike other
property companies, as long as we have
a rent deposit. We know the businesses
will come and grow and move on and
their place will be taken by others.
Many leases are for five years, some
with a break option after three years.
He comments: “No matter how the
market improves or doesn’t, businesses
still want that flexibility and you just have
to reflect it in the overall terms”.
Shaftesbury’s approach across all its London
holdings is to engage with its occupier
customers and commit to communication.
“We are a landlord that doesn’t hide
away,” says Kirk. “If you do have issues
you know where we are.
“Whenever we agree Heads of Terms
the first thing I do is to contact the main
person at the incoming business. I drop
them a quick note to say hi and that if
they have any issues down the line then
I’m the person to deal with. You start a
relationship right then. I don’t claim that
we are always going to get on with every
single tenant but I like to think we can.
And they know who we are if they need
to talk to us.”
Given the demographic of the office
occupier community, the estate is a
useful barometer of what is going on
in the West End market generally.
Kirk reports that 2012 was perhaps the
“strangest year” that he has experienced:
“From January to March we had a lot of
viewings but literally no offers, nothing.
Then something changed. I don’t know
what – maybe the prospect of the
Olympics and getting things decided
before then – but suddenly every viewing
was creating an offer and from March
onwards we had people practically fighting
over office space. That produced quicker
deals and rental growth”.
The project at 36 Carnaby Street which
created 9,000 sq ft of new offices was the
first substantial development of its kind on
the estate for several years and Shaftesbury
is now looking at further projects.
More development to the rear of
36 Carnaby Street on Kingly Street will
provide another 7,000 sq ft of space
while refurbishment adjacent to Kingly
Court – the courtyard scheme that sits
between Kingly Street and Carnaby
Street – will provide around 9,000 sq ft.
Redevelopment of 22 Ganton Street will
create a further 19,000 sq ft of offices.
New offices will bring new occupiers but
Kirk does not believe Carnaby’s office
community will lose its distinctive identity.
“I don’t think it will change massively to
be honest. It’s Soho and it’s always had
that artistic and creative feel to it and
I don’t think that will change.
“There will be other types of businesses
who want to be alongside that energy and
feed off the buzz that it generates, but
you’ll always have that creative core.”
More information at:
carnabyoffices.com and carnaby.co.uk
14 020 Issue 2 Q2 2013

Graham Ruddick has been writing about property, industry, cars and professional services
at the Daily Telegraph since 2007 and is now also covering the retail sector. 020 caught
up with him and turned the tables with a few choice questions…
Graham Ruddick
How did you get into
journalism?
I always wanted to be a journalist and
won a place on the Telegraph graduate
scheme after leaving university.
Does working at the
Telegraph mean you have
to vote Conservative?
When I joined the organisation I was
told it had only one political allegiance
– to the United Kingdom.
First big scoop?
Paul Reichmann selling out of Canary
Wharf in 2009 springs to mind.
What property stories
get you interested?
Big deals and big personalities always
get us interested. But we also love a bit
of history at the Telegraph, so a small
deal or development can become a
cracking story if there is a story behind
the property. For example, I remember
doing a piece on the former London home
of John Pierpont Morgan being sold.
How does the property
business compare with the
other sectors you deal with?
The entrepreneurialism and passion
in property stands out. Compared to
industry or retail, a relatively small group
of people are responsible for an incredibly
important and financially valuable part of
the economy.
Ever been tempted to get
involved in a bit of commercial
property investment?
Yes. Buy low, sell high: it’s easy isn’t it? I’m
still looking for the right sovereign wealth
fund to finance my aspirations though.
Information gathering:
long lunch or quick coffee?
The modern demands of 24-hour
journalism and the internet mean it’s
increasingly a quick coffee. However,
when time allows, long lunches tend
to be far more valuable and enjoyable.
You also write about the
motor trade: what’s the
best car you’ve sat behind
the wheel of?
Aston Martin Rapide. Once you have
driven an Aston Martin on the open road it
is difficult to imagine driving anything else.
The Ford Focus sat at home is much less
appealing these days.
You write for a living:
got a novel in you?
I think every journalist has aspirations
of writing a book at some stage in their
career, but whether it would be any good
is a different matter. I think I’m more
likely to write a book about the history
of football tactics.
Ah yes, you’re a big Man
United fan: time for Sir Alex
to hang up his boots after the
Champions League fiasco?
The only person who had a Champions
League fiasco was the referee. Sir Alex
proved he still has the passion for the
big games. There are a few more seasons
in him yet.
Favourite London building?
The Olympic Stadium. It represents
everything that is good about London and
the UK. Until West Ham move in anyway.
Anyone special in your life
or are you wedded to work?
Well, I’m single at the moment so I
guess that means I’m wedded to work.
I’m only 27 though.
London Olympic Stadium
16 020 Issue 2 Q2 2013 H2SO.COM 17

Matt Yeoman and Paul White
of BuckleyGrayYeoman
Re -make,
re -model:
a Soho story
For many years, 25 Soho Square was home to the
Football Association and a backdrop to TV shots
of contrite footballers arriving to hear their
disciplinary fate. It has now been transformed
into a building which reflects the new Soho.
We spoke to the architects behind the project
“Soho is the original ‘creative cluster’
that we now see being emulated
all over London,” says Paul White
as he looks out from the recently
completed 25 Soho Square.
“It is home to some of the city’s
greatest creative and media
companies and offers social and
cultural experiences that are second
to none. When Crossrail opens, this
building will be half an hour, doorto-door,
from Heathrow.”
White and Matt Yeoman are
directors of BuckleyGrayYeoman,
the architectural practice that
designed Aviva Investors’
comprehensive remodelling of
the 43,000 sq ft office building.
BGY is a refreshingly diverse
practice. At a time when many
architects tend to plough a single
furrow, BGY prides itself on variety.
On its website projects such as a new
Nando’s in Dundee (unlike any other
Nando’s you’ve ever seen) sit next to
a business park in Warwickshire and
a sleek office project in Mayfair.
Yeoman explains: “The thing that
gets us up in the morning is the
fact that we can do a project like
Soho Square or a private school
or a Fred Perry store in Munich or
masterplan a development in East
London. We are quite a broad church
and we think that has contributed
to our recent success. The only
common denominator in our work
is design and the care we take on
all our projects.”
At 25 Soho Square, there was
no blank canvas to work on. The
building’s frame dates from the
1920s and the legacy of the Football
Association’s occupation had left it
with a very corporate feel.
“By the time the FA was leaving the
building, Soho was changing,” says
White. “It had become a much more
buzzy place with a lot of creative
businesses coming into the area.
Before we pitched for the job, we
spoke to Paul Smith at H2SO who
was instructed on the scheme,
and it struck us that you could do
something far more interesting
without just lashing up the services
and pretending it’s funky.
“We considered each area of the
building. When you’re working
with an existing building you can’t
just throw out ideas. Before we
presented to the client we spoke
to a structural engineer, a services
engineer and even building control
at Westminster to see what we could
actually design and deliver. So when
we presented they knew we’d done
our homework – that it wasn’t just
blue sky thinking.”
18 020 Issue 2 Q2 2013 H2SO.COM 19

For many occupiers,
outside space is a
must-have and we
have been able
to provide some
fantastic terraces
Simon Davies of Aviva Investors
comments: “We were looking for
architects who could create a design
that responded to the envelope of
the building, the changing nature of
the location and the occupiers Soho
is now attracting. We believe the
collaboration between ourselves,
BGY, the letting agents and the
whole 25 Soho Square team has
produced a building which perfectly
suits the location and the market”.
Framed by a huge bronze portal,
the new double-height entrance
to the building has given it a much
more emphatic presence on the
square. The raw concrete walls and
terrazzo flooring of the entrance
lobby leads to three new lifts and
a feature staircase.
The refurbishment has added floorto-ceiling
glazing on the side and
rear elevations, resulting in naturally
lit, open internal spaces. The new
design has retained elements of
the existing structure, including the
concrete core and brick façade,
while extending the upper three
floors and creating a series of
four high-level outdoor terraces.
The terraces are a major plus for
the building. “The top floors used
to be quite compromised in terms
of floorplate and are now more
generous with the terracing,”
observes White, “For many
occupiers, outside space is a
must-have and we have been able
to provide some fantastic terraces
at the top of the building”.
Paul Smith of H2SO – who are letting
the building with Jones Lang LaSalle
– reports: “The contemporary feel of
the remodelled building – using raw
materials in a refined way – seems
to have hit the nail on the head for
occupiers looking for something
different to suspended ceilings and
inset lighting.
“The exposed, ceiling-mounted, air
conditioning has been a major factor
in this respect. Not only does it
provide the necessary cooling, it also
brings form and volume to what could
have been just functional space.”
The BGY duo are confident that what
has been created is in step with the
new Soho. White observes: “25 Soho
Square is the right building, in the
right place, and there’s never been a
better time to do business in Soho.”
Regular business travel outside
London and across Europe gives
him an opportunity to assess the
Capital and its changing identity:
“The thing that never ceases to
amaze me is how design conscious
and focused London is in terms
of what it produces. There is a real
hunger for well-designed products
and buildings”.
He believes that projects like 25
Soho Square – the transformation
of an existing building – is going to
become an important strand of what
is happening to London’s property
landscape.
“The shift I have seen in the last five
years or so is this move away from
new build and towards the re-use
of buildings. I think that is going to
be very much the theme for coming
years: looking at buildings and
seeing how we can get the most out
of them and how they can work.”
He cites the example of BGY’s
own offices in The Tea Building in
Shoreditch: “It’s a beautiful, classic
old warehouse building that used
to house tea that is adaptable, is an
interesting space to work in, and has
lots of character. If you translate what
we have got in this building through
London then there are real pointers
as to what can be achieved”.
The adaptation of The Tea Building was
carried out by Derwent London with
whom BGY are working on one of their
next projects to complete: the Buckley
Building in Clerkenwell. The building’s
name commemorates Richard Buckley
– one of BGY’s founders who died
tragically while on holiday in 2008.
The development involves the
conversion of former factory units and
will provide 100,000 sq ft of offices
when it completes in the Spring.
BGY’s ability to adapt and transform
existing buildings – to “re-make,
re-model” – looks like it will be
keeping them busy in the Capital
for some time.
More information at: ASOHOSTORY.COM
and BUCKLEYGRAYYEOMAN.COM
20 020 Issue 2 Q2 2013
H2SO.COM 21

DOING A GREAT DEAL
CENTRAL LONDON OFFICE SPECIALISTS
Leasing / Investment / development / Lease Advisory
Some 2012 HIGHLIGHTS
23 Savile Row, W1
The Wellington Portfolio, WC2
1 Berkeley Street, W1
Bond Street House, W1
Client: Quantum Global Real
Estate Fund / LaSalle
Investment Management
Client: CBRE Global Investors
Sold for £43m
Client: Crosstree
Lease advisory
Client: iii
Lease advisory
Acquired for £218m
33 Margaret Street, W1
Client: Great Portland Estates
95,000 sq ft pre-let
Whitehall Place, SW1
Client: The Crown Estate
Sold for £20m
The Soho Portfolio, W1
Client: Noved Investments
Sold for £74m
Commodity Quay,
St Katharine Docks, E1
Client: Max Property Group
Leasing agents
for 130,000 sq ft
Oliver’s Yard, EC1
Rathbone Place, W1
Crane Building, SE1
33 Jermyn Street, SW1
Client: Derwent London
Client: Great Portland Estates
Client: Dorrington
Client: Standard Life
Lease advisory
Design development and
leasing agents for 180,000 sq ft
Design development and leasing
agents for 50,000 sq ft
Lease advisory
30 Berkeley Square, W1
Client: PRUPIM
50,000 sq ft sale agreed
Devonshire House,
1 Mayfair Place, W1
Client: Offshore Unit Trust
Leasing agents for 80,000 sq ft
Western House,
99 Great Portland Street, W1
Client: Scottish Widows
Investment Partnership
Acquired for £12m
7 Howick Place, SW1
Client: Estate4
Sold for £54m
Minerva House, SE1
Client: Great Portland Estates
Acquired for £60m
1-5 Poland Street, W1
Client: PRUPIM
27,000 sq ft let and sold
for £30.4m
French Railways House/
50 Jermyn Street, SW1
Client: Great Portland Estates
Acquired for £39m
Johnson Building, EC1
Client: Derwent London
Lease advisory
40 Grosvenor Place, SW1
Client: Grosvenor London
Office Fund
50% share sold for £107m
Rex House,
Regent Street, SW1
Client: The Crown Estate
Lease advisory
Kinnaird House
Pall Mall East, SW1
Client: Delek
Lease advisory
12-18 Grosvenor Gardens, SW1
Client: LVMH
30,000 sq ft acquired
22 020 Issue 2 Q2 2013
H2SO.COM 23

THE
SILVER
LINING
When the walkway connecting HMS Belfast to the southbank
of the Thames collapsed, it closed the hugely popular tourist
attraction for six months. But some good has come from the
calamity and signalled a brighter future for the warship.
You can’t just
present a ship,
you need
much more
interpretation
Phil Reed, Museum Director
HMS Belfast
On November 29th 2011, Phil Reed left his
office on board HMS Belfast and crossed
the walkway that connected the ship to the
south bank of the Thames. The Imperial War
Museum Director with responsibility for the
warship tourist attraction was heading for a
meeting in the West End, but before he had
reached that appointment the entire walkway
he had just crossed crashed into the Thames.
He recalls: “We had decided to restore the
brow – most people would call it the gangplank
– which enabled visitors to get aboard from
Queen’s Walk. We’d been doing restoration on
its three separate sections and that day were
working on the oldest section closest to the ship.
“The contractors were actually getting very
close to finishing the job when someone
inadvertently sawed through some metal
work that they shouldn’t, and that was that.”
The result was that the unique attraction was
closed for six months, but the misfortune
precipitated an already planned-for
redevelopment of the quayside ticket office
into a café, shop, admissions area and
fashionable roof-top bar. While it was hardly the
circumstance in which Reed would have wanted
to proceed with the works, he points out that
the silver lining is that it hastened work which
will be a long-term benefit for the attraction.
“The previous building was put up as a
temporary structure more than 20 years ago
and actually belonged to St Martin’s Property
Corporation, which has substantial ownerships
along this Southbank stretch of the Thames.
“The other relevant party to getting the project
off the ground was the Port of London Authority
who basically control all moorings and access
points on the Thames.”
Reed brought in Felix Fiennes of H2SO to
negotiate new leases with St Martin’s and the
PLA so that the future of Belfast’s mooring and
visitor centre would be secured. It was an unusual
and sometimes complex process. Fiennes points
out: “There’s not much precedence for negotiating
leases for 75-year old warships on the Thames”.
However, there are now lease agreements in place
which, as Reed puts it, will essentially apply as
long as the Belfast is moored on the river.
The new £2m visitor centre was completed
at the turn of the year and Reed is excited by
the contribution it will make.
“We wanted to redevelop to make more of it.
It will be more welcoming to people than the old
structure. It’ll make clear the ship is a place to visit
– and it will help generate much needed income
to sustain the long-term future of the ship.
Although the ship is a designated National
Museum it does not get any Government
funding so the Imperial War Museum has to
subsidise, and the ship has got to earn its keep.
After the opening of the new quayside building,
the aim is for the attraction to be fully paying its
way within five to 10 years.
Prior to the brow collapse, around 250,000
people had been visiting the ship each year.
H2SO.COM 25

Under Reed’s management, it has been
transformed from a rather static exhibit to a
much more interactive, interpretive experience.
“We are trying to enliven the ship because
people’s expectations of museum attractions
have changed. You can’t just present a ship,
you need much more interpretation.”
Younger visitors can now do the “Kip-on-aship”
overnight stays on the Belfast. There are
interactive screens dotted around the ship and a
new Gun Turret Experience. Reed is committed
to improvements that will make the ship come
alive to visitors but not cheapen its history or
the memory of those who served on the ship.
HMS Belfast was launched on St Patrick’s Day
in 1938. A “Town” class warship whose first
active service was to form part of the blockade
against the German Navy after war broke out in
1939, the ship had an early success capturing
a disguised German vessel which was trying
to return with reservists from Brazil. Shortly
afterward, she struck a mine and broke her keel.
Long repairs were necessary but the ship was
refitted, returned to action and was involved in the
sinking of the German battleship Scharnhorst, D-Day
landings, and the war in the Far East against Japan.
The ship was in active service for a further
20 years including action in the Korean War
before being decommissioned in 1963.
By the late 1960s, she was threatened with
being broken up before a private trust led by
Rear Admiral Sir Morgan Morgan-Giles
successfully campaigned for its preservation.
Since 1971, it has been permanently moored
on the Thames in the shadow of Tower Bridge.
Phil Reed has been with the Imperial War
Museum for more than 30 years and was closely
involved in the development of the Churchill War
Rooms in Whitehall as a major attraction. He took
over responsibility for the Belfast two years ago
and the initial priority was maintenance of the
ship’s fabric.
“The ship needs a lot of work. Its active service
means that on many occasions it had to be
quickly patched up to get back into action so
there’s been quite a few ad hoc repairs along
the way: if you look at the funnels, an awful lot
of what you see is filler.
“Just the basic maintenance is pretty onerous.
We are looking to paint the ship’s starboard
side which faces the city at the moment and
are looking for a sponsor because the cost is
about £75,000.”
With regard to the visitor experience, the main
focus is giving people an impression of what it
must have been like to serve and live on board
in peace time and in periods of extreme danger.
While some tourist attractions were disappointed
by failure of the Olympics to generate more
visitors, Reed believes there will be more of a
slow-burn effect which will see the benefits
come through in 2013 and beyond.
“I think most of the new visitor flow will come
this year. It wasn’t really likely that people would
come when hotel prices were stratospheric
and the perception was it would be difficult to
get around London, but the games have been
a great advertisement for the City. Everybody
is expecting a big bounce back this year in
tourism. For the Belfast, my aim would be to
get attendance up to 350,000 and beyond.”
As the number of people who served in the
Second World War dwindles, the Imperial War
Museum faces the task of maintaining the
relevance of its museums – including HMS
Belfast – and communicating an understanding
of what they represent.
However, Reed believes that in meeting that
challenge the IWM has a major ally: the popularity
of genealogy.
“It was a concern of the war museum some years
ago that the more remote the major conflicts
became, the less interest there would be from
the public because they couldn’t relate to them.
“However, in fact if anything it has come
the other way round because there has been
a huge growth in researching family history.
For a growing number of people, the further
they get from events the more they want to
know about them.
“Millions of people in the UK have relatives who
were involved in some way in the Second and
probably the First World War, and many of them
want to see how grandad, great grandad or
whoever served in the Navy and how they lived.”
HMS Belfast is an eloquent reminder of Britain
in times of war and peace and is an essential
visit if you want to understand the realities of
serving in a navy warship.
Reed’s enthusiasm for the ship is huge and when
he speaks about the relationship that sailors have
with their ships it is clear he could be speaking
about himself.
“People who serve in the Navy love their ships,
they really do,” he says “The old saying was that
a sailor’s ship was his mistress and that they
often put them ahead of their wives.
“I don’t know about that, but I can see why they
say it. You do get wedded to them in a way.”
More information at: IWM.ORG.UK
“There’s not much
precedence for
negotiating leases
for 75-year old
warships on
the Thames
Felix Fiennes, H2SO
26 020 Issue 2 Q2 2013
H2SO.COM 27

COMPETITION
LONDON
ROCKS
The Beatles set a trend for using
London as a backdrop for album
covers when they were pictured
striding across a zebra crossing
on Abbey Road.
AS VINYL BECOMES HIP ONCE AGAIN,
CAN YOU NAME THE PLACES IN LONDON
FEATURED IN THE ICONIC ALBUM
COVERS OPPOSITE?
IF YOU THINK YOU KNOW the answers,
EMAIL DUNCAN.LAMB@H2SO.COM
THERE’S A MAGNUM OF CHAMPAGNE
FOR THE FIRST NAME OUT OF
THE EDITOR’S HAT.
*Closing date for entries: May 31, 2013
28 020 Issue 2 Q2 2013
H2SO.COM 29

020 Real Estate
020 Real
Estate
AS THE BOUNDARIES BETWEEN
COMMERCIAL AND RESIDENTIAL
PROPERTY CONTINUE TO BLUR,
WE TAKE A LOOK AT WHAT’S
HAPPENING IN THE CENTRAL
LONDON PROPERTY MARKET.
P30-32
News
º TAG takes Poland Street
º Savile Row buy is largest
2012 West End deal
º Auctioneer swoops IN
Berkeley Square
º Soho sells at 4.5%
º Government exit lines
up residential scheme
º Investors compete for
Whitehall freehold
º REVIEW SIGNALS RENT UPLIFT
P33-34
THE ‘LOST OFFICES’ OF
LONDON’S WEST END
a unique perspective on
the office-to-residential
conversion trend in
central London
p35
THE market: OFFICE AGENCY
p36
THE market: investment AGENCY
p37
THE market: lease Advisory
& Asset Management
30 020 Issue 2 Q2 2013
TAG takes
Poland
Street
Tag Worldwide Group and its parent
company, Williams Lea, are moving
their London office to 1-5 Poland
Street in Soho.
The 27,000 sq ft building was
acquired as a development
opportunity by PRUPIM on behalf
of its M&G Property Portfolio.
A comprehensive refurbishment
was completed last summer.
Williams Lea has taken a 15-year
lease on the building with a break
option at the tenth year and will pay
an initial rent of £1.56m per year,
after an 18-month rent-free period.
The initial rent equates to £57 per
sq ft on average or £65 per sq ft
on the best space.
The rent on the ground floor retail
unit is £181,000 per year and will be
subject to an additional 24-month
rent-free period.
PRUPIM Investment Management
Director, Michael Wood,
commented: “Williams Lea and
Tag are market leaders in their
respective fields of corporate
information solutions and creative
marketing design and production.
Their decision to come to Poland
Street is a strong endorsement of both
the quality of the building and also of
Soho as a London office location”.
H2SO advised PRUPIM on the
leasing of the building and also
advised on the subsequent sale
of the building for £30.4m.
Savile Row buy
is largest 2012
West End deal
Auctioneer swoops
IN Berkeley Square
The £218m acquisition of 23 Savile Row by Plaza
Global Real Estate Partners was the largest 2012
office investment transaction in London’s West End.
Plaza was advised in the purchase by H2SO and
is a joint venture between LaSalle Investment
Management and Quantum Global Real Estate.
The venture is targeting predominantly core real
estate assets: quality long-term investments in
excess of $100 million located in major mature real
estate markets around the world. Initial focus is
expected to be on Australia, France, Germany,
the United Kingdom and the United States.
H2SO partner, John Olney, commented: “23 Savile
Row is one of the best office buildings in London’s
West End. The interest it provoked when it came
to the market is testament to the depth of investor
demand that is currently focused on the West End”.
Art auctioneer, Phillips, is to move to a new London
headquarters at 30 Berkeley Square.
The auctioneer’s parent company has acquired
PRUPIM’s long leasehold interest in the entire building.
Paul Smith of H2SO – who advised PRUPIM –
comments: “Buildings on Berkeley Square have
always been among the key indicators for the West
End prime market. When PRUPIM announced its plans
for a new 52,000 sq ft office scheme at the building,
there was huge interest from across the market.
“The high-value art sector – whether represented
by galleries or, in this case, an auction house – has
become increasingly influential in the West End
market and this acquisition is an example of that
continuing trend.”
H2SO.COM 31

020 Real Estate
RESEARCH: OFFICES-TO-RESIDENTIAL
Soho sells at 4.5%
A 13,000 sq ft office and residential property
in the heart of London’s Soho has been sold
to DTZ Investment Management for £11.275m
at a yield of 4.53%.
The building at 22 Soho Square comprises
offices on lower ground, ground and five upper
floors with two apartments on the sixth and
seventh floors. It is multi-let on leases with
expiries between 2014 and 2021, and currently
produces rental income of £540,000 pa.
The investment was sold by RoebuckCapital on
behalf of Moneypenny Limited, a company which
owns a portfolio of commercial properties and
which was acquired in 2012 by the Stobart Group.
Roebuck’s Nick Rhodes comments: “We are
delighted to achieve a price which reflects a
premium of over 16% from the purchase price by
Stobart in early 2012. This deal is testament to the
current strength of the central London market”.
H2SO acted for Roebuck Capital.
Whitehall
WHITE HOT
Strong investor competition has seen the
freehold interest in 3-8 Whitehall Place, SW1
sell for over £20m.
The freehold of the 95,000 sq ft office building
sold to Trust for London at a yield of around 3%.
The property is let to a number of government
departments and produces a current ground
rent of £618,980 pa.
H2SO advised the vendors, The Crown Estate.
Government
exit lines up
residential
scheme
The exit of The Department for International
Development (DfID) from 1 Palace Street SW1
has lined up a major residential scheme at the
160,000 sq ft building near Buckingham Palace.
Advised by H2SO, the property’s head leaseholder,
Delek Global Real Estate, has taken a lease
surrender from DfID and has an option to buy the
freehold which could enable a redevelopment or
refurbishment of the building behind its Grade II
listed facade.
DfID currently occupy a portion of the building
and will vacate it entirely by the end of this year.
The building has views over Buckingham Palace
and was let to The Secretary of State for the
Environment Transport and the Regions on
a lease expiring in September 2020.
Ed Betts of H2SO commented: “The demand
for prime residential in central London has been
well-documented by our research on the trend,
and this is another example of a substantial
office building being lined up for conversion
into luxury apartments”.
For more on the residential conversion trend
in London’s West End, see p33
REVIEW
SIGNALS
RENT UPLIFT
Standard Life has settled the outstanding rent
review on 63,000 sq ft of Grade A office space
at 33 Jermyn Street in London’s St James’s.
The reviewed rent equates to £82.75 per sq ft
which is a 13% increase above the previous net
effective rent.
Nick Powell of H2SO – which advised Standard
Life on the review – comments: “This is the first
rent review on five-year old Grade A space to
show a significant uplift during this rental cycle,
and was the largest rent review to be agreed with
a substantial rental increase in 2012”.
THE ‘LOST OFFICES’ OF
LONDON’S WEST END
H2SO WAS THE FIRST PROPERTY CONSULTANCY TO CHART THE LONG-
TERM TREND FOR OFFICE-TO-RESIDENTIAL CONVERSION IN LONDON’S
WEST END WHEN IT PUBLISHED GROUNDBREAKING RESEARCH IN 2010.
THIS THIRD RESEARCH UPDATE LOOKS AT THE CONSENTED AND
COMPLETED CONVERSION PROJECTS THAT HAPPENED DURING 2011
AND WHAT THE FUTURE TREND MAY MEAN FOR THE WEST END.
By tracking planning applications that are
granted consent for the conversion of office
space into homes in London’s West End
each calendar year, the study gauges the
rate and volume of the office-to-residential
conversion trend in the area.
This latest update to the research shows
that between 2001 and 2011, just over
3.9m sq ft of West End offices have been
redeveloped into homes while a further
1.3m sq ft was converted to other uses
such as hotels and leisure.
Conversion activity
in 2011
In 2011, there were a total of 176 relevant
planning applications within the research
area for change of use from Office (B1) to
residential (C3). This represented a 53%
increase on the number of corresponding
applications made in 2010.
Of the 101 projects that were given consent
during 2011, 38 were implemented during
the year and resulted in the conversion
of 436,448 sq ft of offices to residential.
This represented a 116% increase on the
corresponding volume in 2010.
An additional 167,032 sq ft of office space
was also converted during 2011 as a
consequence of planning consents that
were granted during 2008-2010 but which
had not been previously implemented.
Accordingly, the total amount of space that
was converted from offices to residential
during 2011 was 603,480 sq ft.
Unimplemented
consents
During 2011, a further 205,635 sq ft of
conversion projects were given consent
but were not implemented. These bring
the total of valid – but unimplemented –
planning consents for conversion projects
to just under 500,000 sq ft.
In the first quarter of 2012, 60 of the
undetermined 2011 planning applications
were granted consent and 13 are already
implemented. If all of these consents were
eventually implemented, these alone would
create a further loss of just over 1m sq ft of
offices in London’s West End.
Future trend
With regard to the overall trend going
forward, it should be noted that there is
a substantial raft of buildings which have
been publicly earmarked for conversion but
have not yet entered the planning process.
This increases the potential for a wave of new
residential space conversions decreasing the
overall stock of West End offices.
As noted in previous studies, this loss will
be offset by new office development in
locations outside the core West End, but
will continue to change the environment
and cultural balance particularly in areas
such as Mayfair and St James’s.
It is now understood that in response to
concerns about the effect of the trend on
the West End, Westminster City Council is
preparing to launch a consultation process
regarding office-to-residential conversions.
As a consequence there could be a new –
possibly more restrictive – policy regarding
conversions in place by this autumn.
However, new Government planning
policy which encourages the conversion
of redundant commercial buildings into
residential accommodation can only put
further impetus behind the trend –
and more pressure on the West End’s
stock of office buildings.
32 020 Issue 2 Q2 2013 H2SO.COM 33

020 RESEARCH: OFFICES-TO-RESIDENTIAL
THE MARKET: OFFICE AGENCY
RESEARCH COMMENT
Paul Smith Head of
Office Agency at H2SO:
“Much of London’s West End – particularly
Mayfair and St James’s – was originally built
as exclusive homes and for more than a
decade we’ve seen a growing trend for many
of these properties to return to their original
use. By definition, the vast majority of the
buildings concerned have been period
properties that were invariably 100 years
old or more.
“However, such is the growing international
demand for prime residential in London’s
West End – and the consequent disparity
between the values that can be achieved
by prime residential when compared to
prime offices – an increasing number of the
properties now being bought for conversion
are comparatively modern office buildings.
Queen’s
Park
H.R.
Maida
Vale
Westbourne
Bayswater
“20th-century office buildings that not
very long ago would have been obvious
candidates for redevelopment are now being
earmarked for conversion to residential.
While new prime residential in the West End
Core of Mayfair and St James’s can reflect
capital values of around 30% more than the
corresponding value for offices, the case for
conversion will remain compelling.
“With office development in the West End
Core already at historically low levels, this
further constraint on supply can only put
greater pressure on office rents and leave
occupiers with a narrowing range of choice.
We have already recently seen rents for the
best office space in Mayfair once again pass
the £100 per sq ft mark.
Abbey
Road
Little
Venice
Lancaster
Gate
Church
St.
Hyde
Park
Regent’s Park
B.D.S.
Marylebone
High
Street
“These losses of office space to residential
have been offset by high-quality new
developments coming on stream outside the
West End Core to meet the needs of modern
day occupiers. Typically, these offer larger,
more efficient floorplates, appropriate
for 21st century businesses. However, the
conversion trend is undoubtedly changing
the face of West End Core locations such as
Mayfair and St James’s.
“At present, the rate of conversion is not
abating and is, in fact, due to accelerate.
Conversion ambitions may be curtailed if the
expected Westminster consultation process
regarding office-to-residential conversion
does result in a more restrictive policy.
However, this may be offset in part by the
Government’s new pro-conversion planning
policy that was issued at the beginning of 2013.
“In the medium-term, if developers feel that
policy change is the likely outcome, the result
may be that we see a considerable number of
planning applications being made in an effort
to get conversion consents before the new
planning environment comes into effect.”
West
End
SPACE SQUEEZE
PUTS PRESSURE ON RENTS
• Dearth of Grade A space
• Occupiers cautious but now taking pre-lets
• Substantial fall in supply expected in 2014
• Upward pressure on rents
London’s West End office market continues to be characterised
by a dwindling supply of Grade A space. With vacancy rates under
5% and a dearth of substantial new development scheduled, there
will continue to be upward pressure on rents.
The lack of supply has allowed landlords to take a robust stance, even
in the face of continued economic uncertainty which has seen occupiers
remain cautious.
Even though demand has been modest by recent standards, it is
notable that activity levels have still been considerably higher than the
bottom of the last cycle (Q2-Q3 2009) when less than 600,000 sq ft of
take-up was recorded for two consecutive quarters. This is partially due
to the fact that shorter lease lengths and tenant break clauses have
been significant ‘move motivations’.
Rental growth and the hardening of incentives have been most
evident in selected locations outside the West End core of Mayfair
and St James’s where occupiers have been able to find the size and
quality of space to meet their requirements. In the Core, prime rents
have generally remained stable but there has been evidence of rental
growth for new or newly refurbished space, particularly in smaller units
of under 5,000 sq ft.
As a consequence of the current market dynamics, West End occupiers
are again being compelled to consider taking pre-lets of offices under
construction. Pre-lets have not been a theme in the West End market
H2SO Office Agency
since the late 1980s, but with a limited development pipeline this
trend is set to continue.
While future demand may be difficult to judge, we can accurately
explore where the West End office market is headed in terms of supply.
This year will bring around 1.7m sq ft of new offices to the market, but
there is a substantial fall in supply expected next year with just over
600,000 sq ft due for delivery in the West End in just seven schemes.
To give this perspective, the long-term average new development
supply each year is approximately 1m sq ft.
Projections for 2015 onwards become less clear as only the largest of
schemes tend to be planned that far in advance. Among the expected
projects for this time are the various Crossrail-related developments at
Bond Street, Hanover Square and Tottenham Court Road together with
around 750,000 sq ft in Victoria.
It’s clear from these supply projections that even if demand remained
at historically modest levels, there is little sign of over supply facing the
West End office market.
Looking ahead we expect that, while there will be spikes of availability
in certain submarkets, the muted supply environment is set to continue
between now and 2018. Accordingly, occupiers looking for substantial
amounts of Grade A space will not be confronted with huge choice.
Against this backdrop, rents should continue to be progressive both
in Core and non-Core West End locations.
H2SO’s Office Agency team covers lettings, sales and acquisitions; primarily concentrating on London’s West End, Midtown, Northern
Fringes and Southbank. It is currently advising on the leasing of more than 1.5m sq ft of central London office space either available now
or being developed. The team has more than 80 years’ combined experience, with exceptional market knowledge and a proven individual
track record of success. This is supported by numerous databases, allowing us to be fully up to date with rental trends, office availability
and occupier demand patterns. For more information, please contact any of the team:
Knightsbridge
and Belgravia
RESEARCH
STUDY AREA
St James’s
B.D.S. Bryanston and
Dorset Square
H.R.
Harrow Road
Warwick
Churchill
Vincent
Square
Tachbrook
PAUL SMITH
020 7788 8955
paul.smith@h2so.com
David Hanrahan
020 7788 8952
david.hanrahan@h2so.com
ED BETTS
020 7788 8956
ed.betts@h2so.com
RICHARD TOWNSEND
020 7788 8970
richard.townsend@h2so.com
Oliver KING
020 7788 8963
oliver.king@h2so.com
FREDDIE PRITCHARD-SMITH
020 7788 8962
freddie.pritchard-smith@h2so.com
34 020 Issue 2 Q2 2013
H2SO.COM 35

THE MARKET: INVESTMENT AGENCY
THE MARKET: Lease Advisory & Asset Management
DEMAND CUTS SUPPLY
after strong 2012
RENT REVIEWS
APPROACH “TIPPING POINT”
• Stock levels diminish further to below £1bn
• Over 33% of all 2012 deals transacted in Q4
• Overseas investors continue to dominate as UK funds sell
• Positive outlook with prime yields likely to sharpen
• Upward pressure on rents
• Jermyn Street review sends signal to market
• Significant reversions will come through this year
• Landlords pursuing more active strategies
London’s West End saw office investment transactions worth in excess
of £6bn during the course of 2012, an increase of over £500m from 2011.
The final quarter of 2012 was by some distance the most active part of
the year with over £2bn of deals concluded – representing around
a third of all 2012 activity.
At the end of June, a significant tranche of stock came to the market.
Typically no more than £1bn is available at a given time, but by Q3
we calculated there was more than £2.5bn of property on the market.
However, demand – driven principally by overseas investors – was
sufficiently strong to absorb this unusually high level of asset availability.
The last quarter of any year is traditionally very active, but the last three
months of 2012 saw unprecedented levels of transactions.
Our analysis shows that over 65% of all acquisitions were undertaken
by private and institutional overseas investors. London’s perceived
status as a ‘safe haven’ has been maintained despite the slow recovery
in the domestic economy and concern over the future of the Eurozone.
The spectrum of demand has undoubtedly broadened with most
areas of the world represented. In addition to the growing inflows of
capital from the Far East, there was a discernible rise in demand from
European investors seeking situations offering the potential for longer
term wealth preservation.
UK institutions were the largest sellers in 2012 as they were in 2011,
accounting for more than 25% of disposals which equated to £1.6bn
of assets. This is a trend we expect to continue although a number
of funds have active requirements for UK mandates. REITs and
private UK investors were also notable vendors, each responsible
for approximately 14% of all sales.
In 2013, we have detected no recognisable change in investor
demand, but stock levels have fallen dramatically following the high
level of deals at the end of 2012 leaving active buyers with limited
choice. We expect that overseas investors will continue to dominate
and as a result prime office yields, currently standing at 4%, could well
come under pressure. Similarly there is every chance that retail yields
will follow the same path with more evidence of sub-3% yield levels.
Performance is likely to be derived from rental growth where the
prospects look reasonably positive against the backdrop of a limited
development pipeline.
With availability levels falling to below £1bn, competition for higher
quality assets is likely to be intense, possibly leaving domestic
investors to increase their focus on submarkets outside the core
markets, where better value might be found. Areas such as the
Southbank, Clerkenwell and King’s Cross will no doubt come
under greater scrutiny.
Whilst the outlook remains positive for commercial property in
the West End, it would be imprudent to believe that economic
uncertainty will not have some influence on the market.
When this commentary appeared in the first issue of 020 a year ago,
the renewed concerns about the economy and uncertainty within
the Eurozone led us to predict that rent reviews would be fiercely
contested in 2012.
As the year progressed this was the case. It now feels that we are at
a “tipping point” in the London West End office market which is seeing
greater upward pressure on rent and a strengthening of landlords’ rent
review position.
Greater occupier confidence is feeding into demand for offices while
the dwindling supply of Grade A space is providing less choice. Prime
rents in the core West End have increased during the past year, and
with rent-free concessions on new space being trimmed on average by
around three months, rents have increased by between 5% and 10%.
The 25-year and 15-year leases of yesteryear are, quite literally, expiring.
It has been calculated that around 80% of leases in the West End have
an expiry or break within the next three years while the longest average
new lease length being granted today is 10 years.
Accordingly, rent reviews and lease expiries – and the strategy
surrounding them – are coming sharply into focus. After a period
of thin market evidence, in which few substantial comparable
transactions were helpful, we are now beginning to see solid
evidence which greatly assists with demonstrating rent increases.
At 33 Jermyn Street, acting on behalf of Standard Life, H2SO has settled
the outstanding rent review on 63,000 sq ft of Grade A office space at a
rent equating to £82.75 per sq ft. This represents an increase of 13% above
the previous net effective rent. It is the first rent review on five-year old
Grade A space to have a significant uplift in this rental cycle and was the
largest rent review to be agreed with a substantial rental increase in 2012.
This settlement should unlock a number of other rent reviews and this
year should bring further milestone settlements.
It would, of course, be wrong to apply this to West End offices as
a whole. There is a wide variance in the quality and desirability of
office stock, with occupier demand weakening appreciably when
it comes to secondary space. Such is the sensitivity of the occupier
market, this differential can extend to neighbouring properties on the
same street. However, even this assists landlords as it means that they
can use transactions on Grade A buildings to discount – often leading
to higher rents than may otherwise be demonstrated.
Against a backdrop of hardening rental levels, landlords are becoming
more pro-active in considering their strategy going forward.
The inclination to allow reviews to “roll-over” is being replaced by
a more forensic approach to what might be achieved at review.
For landlords, 2013 will be a year in which it is essential to get down to
business and carefully consider their rent review and asset management
approach. Significant reversions should come through from September
onwards as it will then be five years since the Lehmans collapse which
sent the market into the doldrums.
H2SO Investment Agency
H2SO’s Investment Agency team targets both on and off-market opportunities for central London property acquisitions to meet clients’
investment objectives. Our approach recognises that acquisition is only the beginning of the process of maximising investment returns.
We also provide consultancy on how refurbishment, development or asset management initiatives can realise greater returns.
Since H2SO was launched in 2009, the Investment team has advised on more than £2.5bn of transactions.
For more information, please contact any of the team:
H2SO Lease Advisory & Asset Management Consultancy
Addressing the ramifications of lease events such as rent reviews, break clauses and lease expiries are crucial to either maximising returns from
a property or minimising the costs of occupying it. The team’s blend of market perspective, professional knowledge and negotiation skill gives
H2SO its leading position in the London lease advisory sector with an impressive record of above market transactions.
A holistic approach to asset management adds value by applying expertise to every aspect of a property asset and giving it a direction which will
enable it to maximise its future value. We are frequently asked to look at assets and create fully costed and detailed asset plans as well as providing
more traditional advice on rent reviews and lease renewals. For more information, please contact any of the team:
Rob Hayes
020 7788 8954
rob.hayes@h2so.com
John Olney
020 7788 8953
john.olney@h2so.com
Charlie van der Gucht
020 7788 8968
charlie.vandergucht@h2so.com
Emily Hutton
020 7788 8971
emily.hutton@h2so.com
ALEX KEITH
020 7788 8957
alex.keith@h2so.com
Nick Powell
020 7788 8958
nick.powell@h2so.com
Felix Fiennes
020 7788 8969
felix.fiennes@h2so.com
36 020 Issue 2 Q2 2013
H2SO.COM 37

H2SO is a leading specialist Central London
property consultancy. Its Core Services ARE:
Investment Agency
Whether buying or selling, the H2SO Investment
team has the expertise and acumen to achieve
the best terms for our clients. The team has an
extensive knowledge and experience of the
property investment market in central London.
All instructions are dealt with at partnership level
with enthusiasm and no delegation, enabling
a unique involvement throughout both the
acquisition and disposal processes.
Office Agency
Office agency at H2SO covers lettings, sales
and acquisitions; primarily concentrating on the
West End (postcodes W1 and SW1), Midtown
(WC1, WC2 and EC4), Northern Fringes
(W2, NW1, N1 and EC1) and Southbank (SE1).
The team has over 80 years’ combined
experience, with exceptional market
knowledge and a proven individual track
record of success. This is supported by
numerous databases, allowing us to be
fully up to date with rental trends, office
availability and occupier demand patterns.
Development Consultancy
H2SO believes that development consultancy
can only be truly effective if backed by strong
agency, investment, professional and asset
management advice.
Development consultancy is a progression of
tasks that each requires a particular expertise.
From the identification of suitable sites for
office and mixed use development and
refurbishment, to detailed cash flows and
viability studies for acquisitions or sales.
Lease Advisory
Addressing the ramifications of lease events
including rent reviews, break clauses and
lease expiries are crucial to either maximising
returns from a property or minimising the
costs of occupation.
From either side of the landlord and tenant
fence, it is vital to have access to advisory
expertise and market knowledge that will
deliver the desired outcome.
H2SO’s Lease Advisory team deals with all aspects
of lease negotiation and dispute resolution.
Asset Management
Asset management is an essential factor
in maintaining and driving property value.
H2SO’s Asset Management team has a proven
track record in the central London office market
of devising strategies that can enhance and
deliver value for a wide range of properties.
As an advisory skill, asset management should
not be confused with the ongoing process
of day to day property management – the
maintenance of a building’s fabric and function.
We create asset management strategies for
property investments which take a holistic view
of the assets and identify how value can be
preserved and enhanced. This can include
everything from high level planning to fully
costed cashflow analyses.
20 SAVILE ROW
LONDON W1S 3PR
T 020 7788 8950
W H2SO.COM
© H2SO. April 2013. Design: Siren 020 7478 8300. Editorial: Duncan Lamb 020 7025 8750