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Hard pressed landlords are looking at switching tough to let offices in the square mile to swish apartments for City high fliers to make ends meet.
Pension funds and developers are buying up disused commercial buildings that were home to thriving banks and financial services companies in Central London.
They plan to convert them into up-market homes for those who want to live on top of their jobs or who fancy – or can afford – a prestige postcode.
Among the developers leading the charge to transform the City are Axa, Berkeley Group and Heron International, who also plan to demolish some offices to build homes.
Axa wants to renovate old offices or partly developed “brownfield” sites on the fringes of the financial district as housing.
Berkeley intends to refurbish a derelict office building near Moorgate in to 90 homes, while Heron is already constructing a 36-story tower block of flats near the Barbican.
Commercial property analysts confirm landlords are struggling to find tenants for secondary real estate in the City, and if they want a return on their investment, they need to look at alternative ways to make money.
“The fringes of the City are struggling in terms of letting secondhand buildings,” said Anthony Duggan, head of real estate research at Deloitte LLP told financial monitor Bloomberg. “There will be a number of developments looking at alternative uses.”
Banks, insurance companies and financial firms have fled the City in droves since the credit crunch. Thousands of jobs have been axed in the exodus that has left many streets lined with empty offices.
Rents slipped by around 6% last year, says JP Morgan, and a similar drop is forecast for this year.
Commercial landlords often let space for no rent to fill their buildings rather than leave them empty as they would still attract rates bills from local authorities.
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