Once overlooked, Bloomsbury starts to blossom

Dwarfed by the City’s towers and lacking Soho’s neon lights, Bloomsbury has often been overlooked despite its location at the heart of the capital. But there are signs that investors and occupiers alike have started to notice the market. Last year, investment volumes in the area spiked, reaching a near-decade high of £852m, according to Knight Frank. Two big deals drove that performance. A Curzon Capital Partners fund and Cording Real Estate Group teamed up on the £245m purchase of most of the Holborn Links estate from Israeli billionaire Teddy Sagi’s LabTech, while Pontegadea paid £600m to buy the Post Building by from Oxford Properties Group and Brockton Capital. This year, Singapore’s Sun Venture has bought the Post Building’s neighbour, 1 New Oxford Street, for £174m from Nuveen, which sold the building on behalf of the Central London Office Fund and British Airways Pension Trustees. These sales have brought in new and notable investors to the area and it is likely the expected sales of 90 Holborn and 15-19 Bloomsbury Way could tempt others. LabTech put the two properties on the market for a combined guide price of around £380m in July. Under the radar Bloomsbury has always been a “modest” and “low-key” area, says Simon Elmer, steward of the Bedford Estates, the largest private land owner in the market. Property owners have held on to a desire to “preserve that tranquillity, that oasis feel”, he adds. It is home to one of the country’s top research universities, University College London, as well as the London School of Hygiene & Tropical Medicine, the British Museum and the Wellcome Collection museum and library. But Bloomsbury is not, as yet, known for major core and prime buyer activity. Its fragmented ownership is “a bit like the South Bank used to be”, says Duncan Owen, global head of real estate at asset manager Schroders, and can be a deal deterrent. Large plots are tough to come by, Owen adds, and there is a high number of long, illiquid leasehold structures. “You need a bit of patience, time and effort to dig out what you want,” says Owen, who has overseen several acquisitions in the area, including buildings on Store Street and Chenies Street. “The major attraction for us is you can buy in Bloomsbury and create what those buyers [core and prime investors] are looking for, and you get significant performance,” Owen adds. “We should be creating the property for those people that want to buy the shiny assets at a top price and want a low risk.” That ability to oversee long-term income buildings is what attracted Sagi’s LabTech to the area for its first property investments in the capital, says Robert Akkerman, the company’s chief investment officer, as well as feeling that the area was “really getting undervalued”. Welcome – and welcome back As well as attracting new investors, Bloomsbury is also luring an increasingly diverse range of occupiers. Nationwide decided to establish its new tech hub at the Post Building last year. The move makes the building society a neighbour of insurance firm Rothesay Life, which moved to the building from the City. At the time, Nationwide director Richard Newland told EG that the firm had decided to return to the area to attract the talent of the future. “This building is incredibly well connected, with two tube stations equidistant either side, and when we looked at the sort of people we want to recruit – which is developers and engineers – the availability of talent was around 300,000 to 450,000 [potential employees] in London,” he said. “This building was in the best location in terms of the availability of talent to get to us.” In 2019, the finance sector was the top taker of space in Bloomsbury for the first time in nine years, scooping up more than 88,000 sq ft of space, according to Knight Frank. The area is benefiting from the ongoing momentum behind the life sciences and tech sectors as companies and alumni look to locate close to its academic institutions. It is also part of the burgeoning Knowledge Quarter, which spreads from King’s Cross, where the Francis Crick Institute is based and where Google and Facebook will locate their London headquarters – along Euston Road, past the British Library to Bloomsbury. LabTech also chose the area to launch its flexible serviced office offering Labs early last year. Labs commercial director Matt Watts says the company felt this part of London was “underserved by good quality flexible workspace”. “That’s been a good opportunity for Labs to come into this market and put a foothold on it,” he adds. The initial foray has been successful enough for Labs to explore expanding further by roughly 70,000 sq ft at another building near Russell Square, according to chief operating officer Dotan Weiner. This is despite the ongoing debate over the future of the office as a result of the coronavirus pandemic. Weiner adds that two lettings to an international IT company and fintech firm have now been secured at LabTech’s refurbishment of Victoria House. “People see real value in being in this part of London,” he says. This increasing demand from occupiers is not just down to Bloomsbury being home to UCL or part of the Knowledge Quarter, but also because of its proximity to the West End or the City, both of which are easy to get to by foot. That is an advantage that will become increasingly important in light of the pandemic and people’s reluctance to use public transport, Bedford Estates’ Elmer predicts. An abundance of green space – Bloomsbury has some 15 garden squares – is also a draw. Elmer says the Bedford Estate has seen “unprecedented” demand for access to its squares since lockdown and an uptick in enquiries from companies wanting to use them for product launches and open-air bars. He believes that Bloomsbury’s smaller period buildings will be in greater demand, allowing companies to be self-contained and in charge of their own cleaning regimes and without the thorny issue of lifts. Elmer also argues that the buildings are highly sustainable, thereby appealing to occupiers with ESG commitments. “They’ve been there for 300 years. They don’t have this 60-year lifespan where you build it, knock it down and build it again.” He adds that they are also naturally ventilated – “two posh words for ‘you can open your windows’”. Dwindling pipeline Rents in Bloomsbury remain low compared to some of its neighbouring submarkets. The average office leasing price in the area is £80 per sq ft, according to Knight Frank, but Elmer, Owen and Akkerman agree that there are still many sites in Bloomsbury with relatively low rents. “Rents haven’t hit those heady heights of some areas,” Elmer says. “We’ve never achieved the West End’s £100 per sq ft, so it is still quite affordable.” Schroders’ Owen adds: “There’s a lot of years of growth left and there are lots of rents there that range between £30 to £40 per sq ft for offices – and, if refurbished, you can probably add £10 or £20 per sq ft to those.” Alongside lower rents, capital values in Bloomsbury are also below other parts of central London. “You can buy something in Store Street which is around the £100m mark, but would have a gross development value of £250m-£300m,” Owen says. Akkerman notes that commercial property prices have risen in the area, but agrees that there is still opportunity for developers. LabTech eyed building a new hotel on the site of the former Travelodge at 116 High Holborn, but opted instead for a 200,000 sq ft office building instead, which it is now developing its plans for. LabTech has also recently put bids in on a further three properties in the area, he adds. Last year not only saw a spike in investment in Bloomsbury, but also a big rise in completed office developments, with 264,538 sq ft finished. However, like the rest of London, Bloomsbury’s office development pipeline looks constrained over the next couple of years. Just 65,000 sq ft is in the speculative pipeline, according to Knight Frank. There are also roughly 215 residential units under construction or recently completed. This year 112,298 sq ft is due to complete at LabTech’s Victoria House, while the Bedford Estates’ revamp of 22 Bedford Square is under way. However, the estate has paused on several other schemes as it assesses the market. Schroders’ Owen says the asset manager has long-term plans to refurbish or redevelop its properties in Store Street and Chenies Street, while Axa Investment Managers Real Assets has planning consent to redevelop Castlewood House to create 139,103 sq ft and M&G brought in CO-RE last year to work up plans to revamp 247 Tottenham Court Road. All of which seems to suggest further new investors and occupiers will be on the way for Bloomsbury and that it may well be the area’s time to shine. To send feedback, e-mail louise.dransfield@egi.co.uk or tweet @DransfieldL or @estatesgazette Photo: Ray Tang/Shutterstock