Copyright: David Lawson/Financial Times May 1999Home page
More than 4m sq ft of offices, homes and leisure development are mapped out around Paddington Station in London Such big numbers would normally stir emotions: after all, this is about the size Canary Wharf has reached - and that has generated headlines around the world.
The problem is that such grand plans have been around for almost a decade. The recession killed hopes for regenerating this vast area last time around and there are fears that it could miss another economic cycle. But signs are good that something big may be brewing at last.
The grim Bishopsbridge Goods yard should finally win planning consent this summer for Grainhurst, the partnership of NFC and property developer Regalian. It has managed to cut in half the 30m pounds demanded for environment and community works in a previous agreement. 'We have two office tenants wanting 200,000 sq ft each who told us to come back once we have consent,' said project director Charlie Spencer.
Chelsfield has also changed permissions around the canal basin, giving it more scope for housing. A chunk of the site used by Selfridges has been bought, eliminating what chairman Elliott Bernerd called a 'nuisance' and extending the potential space to almost 2m sq ft.
The potential for homes insulates the scheme from any commercial property downturn, as they move in different cycles. In fact, homebuilding is in the pipeline on land sold to Frogmore and Rialto.
But it is major commercial development that would kickstart the area. Potential tenants ranging from Conoco to Associated Newspapers have come and gone. The usual problem is blamed: UK companies will rarely commit to space until they see it but banks and funds are reluctant to back speculative development.
'The irony is that if someone started building speculatively, it would be snapped up quickly because there is such a shortage of major sites in the West End,' says Philip Dawe of real estate consultant Richard Ellis St Quintin.
Bernerd insists he could fund internally and does not rule out beginning work on a smaller building of around 80,000 sq ft. Regalian and NFC will need a partner with deeper pockets but that is no longer so far-fetched. Land Securities, Britain's biggest property company, recently cast an eye over the scheme.
One key factor that could get things moving is the Heathrow Express. Around 12,000 passengers a day are pouring in and Dawe points out how many represent big companies which might be looking for space.
Bernerd anticipates customer support facilities normally associated with airports. Stakis has already taken a 100m pound plunge by starting work on the Metropole, its biggest project and the largest convention hotel in Europe. Hilton will run the renovated Great Western.
More hotels could spring up. 'The big names are desperate for locations around central London fringes, and this area has the bonus of the Heathrow link,' says Sally Robinson of Arthur Andersen
Railtrack is spending millions upgrading the station with check-ins and a baggage tunnel to Heathrow. It is also considering putting more than 500,000 sq ft of development on its own land.
Another potential 1m sq ft awaits on the St Mary's Hospital site where a PFI is in the offing. Rumours circulated that Land Securities wanted to move the hospital to the Grainhurst land then work on a clean site but this seems unlikely, as St Mary's wants to relocate only a part of its facilities and LandSec has been reluctant to become involved in PFIs.
Something will happen, however - if not here then on one of the other big sites. Infrastructure costs are normally a barrier to speculative development but Bernard made enough selling off a chunk of the Basin site for housing to program 9m pounds of preparation work. Regalian's veteran chairman David Goldstone also has a secret weapon. He has held the Grainhurst site debt-free over the years, so he could wait for the market to emerge. Spencer also points out there are a few uses not yet revealed which will help pay the 15m bill for in the Section 106 agreement with Westminster's planners.
Perhaps even more important is the fact that the two potential tenants are both local. 'If we also got one from outside, it would be a bonus,' says Spencer. With prospective rents around 30 pounds/sq ft or less - half the West End peak - and no comparable sites to compete, that bonus may be closer than many doubters have anticipated.
Media and professional service companies are bursting at the seams, and they tend to look at occupation costs rather than cosy traditional locations nowadays. If Fleet Street and half the City can decamp to Canary Wharf, Paddington may play the same role for the West End.