Reserved space

Knightsbridge is not just an alternative to Mayfair for office occupiers. Its property market has other attractions for tenants and overseas investors, discovers Cheryl Freedman

Think of Knightsbridge and Absolutely Fabulous, and Harvey Nichols and Sloane Rangers spring to mind – but, in general, office occupiers and headquarters buildings do not.

Nevertheless, the area retains a certain popularity with tenants because of its proximity to Heathrow. And its affluence courts favour with indigenous occupiers and overseas investors – over 40% of local property owners – who don’t want to move anywhere else.

With this kind of kudos, a distinct lack of supply has helped to boost rents in the area significantly.

Peter Northam of St Quintin sums it up: “Knightsbridge is essentially full up.”

One of the highest-profile occupiers already in the area is tobacco firm Dunhill, which took 5,853m² (63,000 sq ft) at 27 Knightsbridge three years ago at a rent of £398 per m² (£37 per sq ft), a deal which paved the way for general recovery in West End rents, according to agents in the know.

Rents in Knightsbridge are now undoubtedly capable of topping £431 per m² (£40 per sq ft). Dunhill, for example, is currently quoting this figure on sublets of its own space.

But, of course, this is possible only if suitable accommodation arises.

Charles Henriques of Gooch Webster says: “Since Dunhill, no comparable lettings have taken place and none is likely to until either Bowater House or Prudential’s plans for Knightsbridge Green come to fruition. There is a distinct lack of development taking place.”

Knightsbridge Green remains one of the West End’s largest redevelopment opportunities. Northam says of the site: “It will be very interesting to watch because it is a large space in a central area.”

So far, however, Prudential Portfolio Manager’s £500m plans for its enormous 111,480m² (1.2m sq ft) mixed-use scheme at the Green, fronting shoppers’ paradise Brompton Road, have yet to see the light of day, despite the fact that the financial institution has been plugging away at it for almost two years.

Westminster city council earlier this year again turned down a revised planning application. This included provision for 13,418m² (144,430 sq ft) of retail and restaurants, a 2,323m² (25,000 sq ft) health club and 23,225m² (250,000 sq ft) of new offices – 20% of the entire floor space in a scheme which is around 35% residential.

It would have included one office building of 17,094m² (184,000 sq ft) and one of 6,202m² (66,760 sq ft). However, the application was refused because of the inappropriate design of elevations on Brompton Road. Instead, the planning sub-committee said it wished to see a design that “captured the spirit of the age”.

However, if and when the application gets the green light, Henriques believes that it will prove popular. He says: “Knightsbridge has a distinct cachet as an office location and remains insulated from factors affecting the core West End in Mayfair and St James’s.”

And he adds: “Local demand is very focused and you would be mistaken to think that tenants choose this location as an alternative to Mayfair or St James’s. In most instances, demand is from companies already in the locality. Because the area is a popular place to live, the walk-to-work factor is likely to play a part in a company’s decision to locate there.”

On the investment front in Knightsbridge, Schroders has put Macmillan House on the market for £23m – a 3,344m² (36,000 sq ft) building let to four retailers, including Ryman and Laura Ashley.

Like its neighbour Knightsbridge, South Kensington is also a severely limited office location. Recent deals include one at Leo Burnett House, where a floor has been sublet at £323 per m² (£30 per sq ft).

However, there are at least half a dozen requirements in the overall area of 2,787-4,645m² (30,000-50,000 sq ft), says St Quintin’s Northam. Potential development sites include one above South Kensington Station – a site that was due to be developed 10 years ago, and is still up for grabs if the right developer or planning application comes along.

Right now the biggest new development in South Kensington has been a move towards resuscitating the London Transport and Cheval-owned Gloucester Arcade with a letting to supermarket chain Waitrose. Most of the units inside the scheme have remained vacant since 1991, when it was originally completed. Waitrose has taken a large part of the scheme on a 25-year lease. The deal sees it returning to the area after a 10-year absence.

Meanwhile, Benchmark has sold the freehold of a 628m² (6,765 sq ft) retail scheme in Brompton Road, where tenants number Mulberry, A Jones & Sons and Pret a Manger.

In Chelsea, the biggest recent news has been that the MOD is putting the 3.6ha (9 acre) Duke of York and the 4.9ha (12 acres) Chelsea Barracks sites up for sale at £200m each. Meanwhile, bingo operator Vardon has bought the Harbour Club – a work-out venue popular with the late Princess Diana – for £22.4m. The deal was completed jointly with property developer Peter Beckwith.

And, in a pocket of London where the movements of department stores Harvey Nichols and Harrods are the only real headline news, there are plans afoot to refurbish the John Lewis-owned Peter Jones department store on Sloane Square – a measure which will increase its floorspace by 14%.

TRANSACTIONS

251 Brompton Road, SW3: Offices. Bibendum has taken 86m² (929 sq ft) of space on the third floor on a lease expiring 2003 at a rent of £262 per m² (£24.32 per sq ft). Financial consultant Joltclaim has acquired 88m² (950 sq ft) on the second floor on a lease also expiring 2003 at £258 per m² (£24 per sq ft). Cluttons Daniel Smith represented the Wellcome Trust. Marier & Marier acted for Bibendum, while Joltclaim was unrepresented.

7 Montpelier Street, SW7: Retail. Mary Quant has taken 127m² (1,367 sq ft) on a 15-year lease with five-yearly rent reviews at £39,500 pa. Kitchen La Frenais acted on behalf of landlord Threadneedle Property Fund Managers.

99 Kings Road, SW3: Offices. Daisy & Tom is subletting 433m² (4,661 q ft) of first-floor space at £110,000 pa from Computer Associates. Nelson Bakewell acted for the landlord. Conway Morris advised the lessee.

35 Brompton Road, SW3: Retail. Camper Footwear has taken a property offering 54m² (581 sq ft) of sales space and 42m² (452 sq ft) of ancilliary space on a 15-year lease at £215,000 pa. DTZ Debenham Thorpe acted for landlord BP Pension Fund. Healey & Baker represented Camper.

300 Kings Road, SW3: Leisure. ASK Central has taken a 25-year lease with five-yearly rent reviews and three months’ rent-free at £125,000 pa. Shelley Sandzer represented ASK, while Cluttons Daniel Smith acted for landlord Sloane Stanley Estates.

114a Cromwell Road, SW7: Offices. Card Tech has taken 513m² (5,522 sq ft) on a lease from Cheval Property Management. Terms were agreed on a rent of £136,000 pa. Crossland Otter Hunt acted for Cheval. Marshall Hutton represented Card Tech.

Mercury House, 195 Knightbridge, SW7: Offices. Tiller International has taken 352m² (3,789 sq ft) on a lease expiring in December at £37,750 pa. Martin Levy Commercial advised landlord Open Door VAGC. Simons Surveyors acted for Tiller.