Yes, yes, London calling yet again. But the truth of the matter is there’s an unquenchable thirst for London real estate. And next up is perhaps the most interesting project yet — if you’re cool enough for it.
Cities divided by water are generally cursed by dualistic personalities. Right here in Hong Kong there are millions that would never deign to cross the harbour. Gangnam (“river south”) is where it’s at in Seoul. Manhattan Island is buffered by two (technically three) rivers to ensure it remains an elite enclave. The south side of the Thames has its share of detractors and developers are keen to make sure potential buyers know their project is north of the river. That might be about to change.
Gearing up to start construction in the second half of this year is the massive Battersea Power Station project, anchored by the iconic art deco structure that has graced album art (Pink Floyd’s Animals, The Who’s Quadrophenia) and starred in films (The Dark Knight, The King’s Speech), television (Dr Who), video games (Grand Theft Auto: London) and countless celebrity, political and commercial photo ops. When finally completed in 12 to 15 years, the development will include 3,400 residences, 1.7 million square feet of offices, 500,000 square feet of retail space, 160,000 square feet for dining outlets, two hotels, and another 500,000 square feet’s worth of community, cultural and leisure space. Clearly, the minds behind the project have great expectations for the neighbourhood’s future.
“Absolutely,” states Battersea Power Station Development Company Limited CEO Robert Tincknell emphatically. “The key, though, is there have been a lot [London] schemes that are … impersonal, and they haven’t built a community. We’re looking at something with more depth. We want to make it a proper town centre.” Early interest from luxury retailers and Michelin starred restaurants looking to experiment outside the traditional corridors would indicate the rumours of Battersea’s demise are exaggerated. It helps that Tincknell has a clear vision of where he wants to take the project. “Rather than HMV [we want] Piccadilly Records. Rather than Starbucks, Milk Bar,” he explains, and of the hotels, “We want to be kind of edgy and fourstar. We need to build the brand first and then we’ll get more choice on things like that.”
But contrary to some opinions, building the brand might not be difficult. The first 800 studio to three-bedroom flats, townhouses and penthouses have sold like wildfire, and the combination of a moderate £338,000 (HK$4 million) starting price and a less intimidating image made for a good market entry point. “I think that’s exactly one of the reasons we’ve been so successful because that’s exactly the case. I know in Malaysia there was a huge number of first time London investors. People are recognising the benefits and the qualities of this project,” notes Tincknell.
The appeal for owner-occupiers is obvious, but as an investment, Battersea might have its work cut out for it. Perceived as slightly dodgy and a poor option for investors seeking strong yields due to the less restrictive supply, how can an investment make sense? “I think that’s a great point. And that’s why this is such a great project,” Tincknell admits. “We’re much more than just residential. It’s already become the investors’ destination of choice, because of the mix of uses, the Tube, the iconic nature of the Power Station. It’s on the river, by the park and ten minutes from Chelsea. And it will be a fraction of the price it is up in Chelsea.” And that could be the trump card for investors. While capital values are (currently) one-third of what they across the river in Chelsea, the rental yields are currently about one-half, in essence making them better. But for Tincknell, “There are fantastic growth opportunities. We’re averaging about £1,100 per square foot. Go across the river 300 yards and it’s £3,000. You don’t have to be an economist to realise that’s ridiculous. The river is a barrier but it’s not £2,000. I think capital growth is going to be very, very strong.”
Finally, is Battersea as unsavoury as some would argue? “It’s like any London borough. There are parts that are more salubrious than others,” Tincknell states. Battersea is also home to movie stars, the area has no shortage of £3 million homes, and the dreaded south side of the river is home to the Tate and Foster+Partners’ studio among scores of other creative businesses — which is now the city’s largest single industry. Ultimately the project will stretch out to Nine Elms (where Ballymore’s upscale Embassy Gardens is located) and will include its own super-luxury element: the residences that will sit atop the boiler house in the actual power plant (look for those in September).