London property developers are giving up on ‘high end’ conversions

In the last few years, London property developers have been converting offces into high-end residential homes at an alarming pace. But that’s no longer the case, as buyers are drying up.

We've written here several times about the slow car crash that is the new build luxury housing sector in London. See previous posts here and here and for our most recent thoughts, listen to Henry Pryor and me discussing the matter on the BBC yesterday here (about 13 minutes in).

But today's FT has a nice little story that makes it 100% clear that Londonproperty developers know they have over-reached.

The last few years have seen a surge in applications to convert office space to high-end residential homes (or "deposit boxes", given that most are likely to be unoccupied): in the last four years, 4.4 million square feet of commercial space has been turned into housing in Westminster alone. Today, says the paper, "developers are reversing plans to convert offices in central London to luxury apartments" in the wake of a rise in commercial rents and a residential slowdown that has analysts predicting a 20% fall in prices.

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So Land Securities has extended the commercial lease on a building it owns in Victoria despite having permission to turn it into flats, and Derwent London has shelved plans to convert a building in Savile Row.

So there you have it. With stamp duty rising, transparency demands increasing (see previous post), oil prices still well below $50 a barrel, and emerging-market currencies well down on their levels of a few years ago, it seems that there is a limited number of buyers for tiny two-bed flats priced at £1m plus. Who'd have thought it?

There will be more on this in this week's MoneyWeek subscribers can read all about it on Friday morning.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.