Canary Wharf Group is to build a 37-storey tower on neighbouring Wood Wharf filled entirely with flats purpose built for renting.
The £6.2 billion group is also reviewing the mix of the 566 flats in the Newfoundland tower on Canary Wharf, with a view to converting some or all of the 58 floors to rental units.
The news comes after a presentation to City analysts by finance director Peter Anderson in which he said the group planned to become a big holder of private rented sector (PRS) units. Anderson said total returns from PRS exceeded those obtained from building and renting offices.
This view is backed by JPMorgan Cazenove analyst Tim Leckie, who calculates PRS investors could make ungeared total returns of 8.5% per year, based on rents and values rising 2.5% a year: “In our view, this is very attractive and London will see year-on-year increases in the number of renters for the next decade.”
News that Canary Wharf is entering the PRS market will boost confidence among funds and investors who have hesitated for years, fearful of low returns. M&G Real Estate, part of the Prudential, has dipped its toe by funding 152 units in Acton. Otherwise, there has been lots of talk but little action.
Canary Wharf Group will be investing hundreds of millions in PRS because returns beat those from offices, says the firm. Rental income of around £2500 a month for a typical two-bed flat is the equivalent of £50 per square foot of office space, they say. This is about £10 more than the net income from renting offices.
Work on phase one of Wood Wharf begins early next year, including 840 flats in three towers. The PRS tower is to be called Grid, after the small firm of Southwark architects which has designed the 288 flats. Each of the 36 floors of eight flats will have the exact same layout to save costs.
Construction savings will be ploughed into making the flats slightly bigger, with more storage space than units for sale. Each bedroom will be the same size, with its own en-suite bathroom. The entire ground floor of Grid will be given over to meeting and eating space.
Anderson told analysts the group was “seeking to create a brand”. The company, which built the Walkie Talkie, has an 11.2 million square foot development pipeline. This includes the 1.5 million square foot Shell Centre development on the South Bank, held up in court by objectors. The development, being funded by Qatar, contains 877 flats, many along the riverfront. It seems likely some will be built for rent.
Meanwhile, what is Canary Wharf boss Sir George Iacobescu thinking of doing with the Newfoundland tower. Sell or rent? “We are continuing to review our options,” said a spokeswoman.
Strip lighting in Raymond’s memory
Soho Estates will unveil an illuminated sign on October 29 in memory of the founder of a now-respectable property company.
“Paul Raymond’s International Striptease Spectacular” will flash into the night above what used to be the Raymond Revuebar.
The company is run by his son-in-law, John James, for the benefit of Raymond’s granddaughters, Fawn and India James.
This week Soho Estates posted a spectacular set of results for the year to March. Gross assets jumped by £71 million to £510 million on a property revaluation. Profits were up £4 million to £16 million.
“We are obviously pleased with our results,” said James, who says work will begin next September on a 200,000 square foot scheme on a plot which was once occupied by Foyles bookshop.
“We are keen to encourage the creative industry and have plans to establish a creative hub using the basement for editing suites, etc.”
Oakmayne flats off the ground
This weekend marks the closing paragraph in the nine-year war of words between the Ministry of Sound and developer Oakmayne.
Saturday sees the launch of a 41-storey block of flats close to the Elephant & Castle night club.
Owner Jamie Palumbo feared residents would complain about the noise and force closure and tried to block the plans.
The fight went on for years, costing both sides millions. London Mayor Boris Johnson finally ruled in favour of Oakmayne in June.
Palumbo is now planning a move to a nearby underground site.
Oakmayne is planning to sell the 335 flats at what’s called Two Fifty One at prices of between £850 and £950 per square foot.
Oakmayne’s £250 million monument to the war will begin to become very visible next year when work begins.
Park Royal clients make Segro smile
John Lewis has brought satisfaction to industrial developer Segro by signing a 25-year lease to rent a huge shed on the 22-acre site of the long-demolished Guinness Brewery at Park Royal in West London.
The 108,000 square foot unit will be used to deliver furniture and electrical goods ordered online or in-store.
Fruit & veg supplier Mash Purveyors has also signed up with Segro on what’s now the Origin estate for a 53,000 square foot storage shed. All the better to distribute everything from apples and zucchini to hotels and restaurants.
News today of these two lettings comes 18 months after Segro was forced to suspend all work on the estate after HS2 railway planners warned they were going to sequester the land for storing materials. Segro managed to persuaded them otherwise.