British Land is in advanced talks to buy a City of London residential complex, in its first acquisition under a strategy to focus on the booming market for prime homes in the capital.
The UK’s second-largest property company has agreed to buy Wardrobe Court being sold by the Warnford Group, a privately owned property company.
Chris Grigg, British Land chief executive, has said residential will be an increasingly important part of its portfolio, which is mainly in offices and retail property.
British Land declined to comment on Wednesday.
Wardrobe Court, near St Paul’s Cathedral, will be the company’s first residential purchase in the City, where it is working on office schemes such as the “Cheesegrater” building on Leadenhall Street and the new UBS headquarters at Broadgate.
It is set to pay about £56m, or about £800 a square foot, for the scheme, which is mainly made up of serviced flats.
British Land has also looked at prime residential development sites in other parts of London. One person close to the search said the company had expressed interest in sites where the landowners could not build housing schemes, even where there was planning consent, because of a lack of funds or because banks were putting pressure on them to sell or bring in fresh equity.
British Land has identified prime London residential as a growth market. The market is booming, with capital values soaring above their previous peaks of 2007 and rental values climbing rapidly.
Ed Mead, director of Douglas & Gordon, a London estate agency, said: “With London property the only area to be showing price growth, and with foreign buyers and tenants bolstering weak domestic demand, it is not surprising that institutions are targeting residential investments.
“Continued lack of rental stock is creating a booming private rented sector and this, allied to 10 per cent capital growth so far this year and similar forecast for the year ahead, means such schemes have a lot going for them.”
British Land has carried out residential development in the past, but generally alongside large office buildings to create a mixed-use scheme.
It has also normally sold flats in these schemes to investors or homeowners rather than retained them as investments.