| LONDON, July 11
LONDON, July 11 Developers of offices and shops
in search of bigger profits in London's red-hot luxury housing
market may have missed the boat, after a huge surge in values
since 2009 showed signs of easing, property experts said.
British Land, whose portfolio comprises mainly
offices and shops, is reportedly in talks to buy a 200,000
square foot block in London's Mayfair district that has
permission to be developed into luxury homes and offices, for
more than 150 million pounds ($232 million).
Other commercial developers that have stepped up their
residential schemes include Land Securities, which is
building over 200 homes in the Victoria district, and Derwent
London which is turning an office building next to
London's Hyde Park Corner into an hotel, luxury flats and
offices with Grosvenor Group.
British Land declined to comment on the reports.
"Developers may be coming late to the party," Michael Marx,
chief executive of Development Securities, told Reuters.
"How long does a good thing last? You can chase a market up and
up but eventually it will stop."
The boss of a London residential developer who declined to
be named said: "It's becoming a more crowded marketplace with
commercial developers but by the time you've spotted a
bandwagon, it's probably because it's too late."
Prices for luxury London homes have surged in recent years
as economic turmoil in Europe and political uprisings across
North Africa and the Middle East have driven investors to London
in search of a safe haven.
There are signs of a slowdown after the British government
said in March it would clamp down on tax avoidance by overseas
buyers of homes costing more than two million pounds.
Prices for the best homes rose by their slowest rate in nine
months in May, though values have increased 48.4 percent over
the past three years, data from property consultant Knight Frank
The strong performance contrasts with lacklustre demand for
space in the UK's office and retail property sectors due to the
weak economic outlook.
"Prime residential is a market that is sitting up and
begging to be bet on, but you only know whether you have done a
good deal in three or four years time," said Marx.
"The value of offices is about 600 pounds per square foot.
Prime residential could sell for about three times more," Peel
Hunt analyst, Kate Barlow, told Reuters.
Developers including the Duke of Westminster's property
company Grosvenor Group, have converted offices in London's most
exclusive neighbourhoods back to their original use as homes to
Some property analysts welcomed the fact developers were
"Whether it's a bit too late, time will tell," said JPMorgan
Cazenove analyst Harm Meijer. "But from overall asset allocation
point of view it makes sense to have some exposure to the
residential market and keep their toes in the water."
Tony Pidgley, chairman of London residential specialist
Berkeley Group, said commercial developers would pick
up a limited amount of residential deals though he declined to
comment on their timing.
"The best time was obviously just after Lehman Brothers
collapsed, when we stuck 300 million pounds into the market," he