London s Covent Garden Draws a New Wave of Real-Estate Development

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1 London s Covent Garden Draws a New Wave of Real-Estate Development A former fruit market-turned-tourist spot is attracting a number of luxury projects RUTH BLOOMFIELD March 19, :07 p.m. ET A one-time fruit and vegetable market turned international tourist attraction, London s Covent Garden is now attracting a different, and more lasting, kind of shopper.

2 A number of boutique developments in the streets around its famous piazza have launched in the last 18 months, stimulating price growth as buyers priced out of more traditional prime central London neighborhoods move in. The most striking example is the newly listed Beecham, nine apartments within a period building overlooking the piazza. Its average prices have been set at roughly $4,200 a square foot. At present, the average price for new homes in the area is closer to $3,000 a square foot. Gatti House, a remodeled historic townhouse containing four apartments, is due to begin selling later this year. The building was once a restaurant attached to the Adelphi Theatre, and the apartments boast original plasterwork, high ceilings and huge windows. Covent Garden s metamorphosis from mainstream tourist trap to high-end real-estate hot spot has been stage managed by U.K. property developer Capital and Counties Properties (Capco).

3 In 2006 it spent $632 million on a 7-acre swath of Covent Garden, including the piazza itself. It has subsequently increased its holdings to about a million square feet, worth around $2. The strategy, said Sarah-Jane Curtis, director of Capco Covent Garden, has been to create a more mixed environment with better quality shops and restaurants, fewer overpriced tourist traps and a stronger residential community with an emphasis on the premium market. Capco will start work on two boutique developments in the spring. Later this year it begins work on Kings Court and Carriage Hall, a 100,000-square-foot mixed-use project that will include 45 apartments close to the piazza. The investment appears to be paying off. Prices have been rising strongly, amid a backdrop of plateauing values in other parts of London. A recent report by property consultant CBRE on the entire West End, which includes Covent Garden, estimated local annual price rises of 13% in 2014 compared with the previous year. Over the next year, Shaun Macnamara, associate director of the CBRE, believes prices will continue to grow, albeit not at the double-digit rates seen in 2013 and Alex Hensley, sales manager at Stirling Ackroyd estate agents, has noticed a big lift in buyer enthusiasm in the area. He attributes this partly to Capco s involvement and partly to its proximity to London s new rail link, Crossrail, which from 2017 will link Heathrow Airport in west London, the West End and the financial district in east London.

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5 For Becky Fatemi, the managing director of Rokstone estate agents, the appeal of Covent Garden is its culture and night life. People want to be able to walk right out of their doors and go to a gallery or the theater, she said. Of course, given the prices, few Covent Garden buyers are very young; Ms Fatemi said they tend to be in their 30s. Mr. Macnamara notes an important price differential between brand-new and resale property, the former selling for an average price of around $3,000 a square foot. However secondhand property is cheaper and, even in such a small neighborhood, highly dependent on location. Homes close to the piazza and around Seven Dials, a confluence of seven streets filled with shops and restaurants, are priced at about $2,700 a square foot; elsewhere the average price drops to $1,800 to $2,100 a square foot. Covent Garden s appeal is also strong among renters, notably overseas students studying at London University, and lawyers working in nearby Holborn and Lincoln s Inn. In response to this demand several of Capco s previous projects have been build to rent with weekly costs ranging from about $1,000 for a one-bedroom apartment to about $5,250 for a penthouse. There are, however, some observers who fear that Covent Garden has a fatal flaw that will prevent it joining the upper echelons of London s property market, and that is its sheer popularity. The area s shops, market, restaurants and, of course, the Royal Opera House between them attract around 40 million visitors a year, bringing with them noise, crowds, and parking problems. I think that Covent Garden will always divide opinion because it is so busy, said buying agent Jonathan Mount, a partner at The Buying Solution. It is very vibrant, but if you try and get somewhere quickly on a Saturday morning forget it you will be almost bumping shoulders with crowds of tourists everywhere.