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£1B Harley Street Medical Area Balances Brand, Ethics And Science To Tap Into Health Tourism Boom

Say the name Harley Street, and the mental associations with the high-end medical profession are instantaneous: discreet, elegant building facades, tasteful waiting rooms, white coats and a reassuringly expensive bill at the end of your visit.

For more than 150 years, Harley Street has been the epicentre of the private medical industry in London, and today more than 5,000 medical companies and practitioners operate in what has been branded the Harley Street Medical Area. They work across 250 specialisms, and the turnover of the practitioners there is more than £1B, driven by the rise in medical tourism. The area has turned into a medical cluster, and keeping it that way is a fascinating, under-the-radar real estate story. 

Harley Street has seen medical practitioners congregate since the 1860s.

Harley Street is a microcosm of the changes happening in the modern medical profession, and that is forcing the area’s owner, the Howard de Walden Estate, to manage it in a very modern way. Assets are being renovated to create bigger floorplates for big occupiers, and the company is in the process of creating a flexible office offering for general practitioners and other smaller medical tenants, in what would be one of the first such facilities in the UK.

But at the same time, the management of the area poses some interesting social and ethical challenges. Harley Street has long seen less reputable medical practitioners and alternative therapists trade on the name it has built up for serious medicine and research, and screening these tenants out is a constant process. Howard de Walden has also faced ethical quandaries and criticisms over exactly which kind of medics it has chosen to lease space to over the years. 

“You could compare it to a shopping centre in some ways,” Howard de Walden chief executive Andrew Hynard told Bisnow.

That includes having anchor tenants: larger hospitals and private clinics like The London Clinic, The Princess Grace or the King Edward VII’s Hospital on Harley Street. 

“Those organisations might then refer you to a specialist oncologist or opthalmologist, and we have those practitioners in the area, too. We work hard to create the right blend of specialists, and it is essentially a physical medical campus.”

It didn’t start out that way. Historians aren’t entirely certain why doctors first started setting up on Harley Street in the 19th century. Some surmise physicians might have been drawn by the quality of life; the houses were beautiful and spacious, close to train stations like Euston, but cheaper than Mayfair and Belgravia.

Whatever the reason, doctors started to congregate there. Historical records show there were about 20 in 1860, 80 by 1900 (by which point the area had passed into the ownership of the Howard de Walden family) and 200 by 1914. By the time the NHS was founded in 1948 there were 1,500. 

Harley Street is a centre of medical tourism, receiving more than 2 million patient visits a year.

Famous medics who practised there include Sir Frederick Treves, who pioneered appendix surgery and treated Jospeh Merrick, better known as the Elephant Man; Florence Nightingale; and Lionel Logue, who helped George VI with his speech impediment, inspiring the film The King’s Speech

Today what Howard de Walden calls the Harley Street Medical Area totals about 1.85M SF, of which it owns 1.55M SF. Those 5,000 medical practitioners employ a total of about 20,000 people, and there are 2 million annual patient visits to the area, many of those wealthy foreigners who travel specifically to London for medical treatment. 

Howard de Walden collects £43M of rent annually from tenants in the area, 32% of its £134M rent roll. It doesn’t offer a breakdown, but if the same ratio were applied to Howard de Walden’s £4.6B portfolio valuation, that would make the Harley Street Medical Area worth about £1.5B.

Hynard said top rents for Harley Street are around £90/SF, and leases run from 10 years at the shorter end to as much as 25 years.

The nature of the demand it is seeing from new occupiers is causing it to manage its properties in a different way. 

At 142-146 Harley Street it has taken back possession of space from numerous smaller occupiers and combined three smaller buildings into one 16K SF building that it will let to a single occupier. 

“From the demand we’re receiving we’re looking to create spaces with bigger floorplates and larger amounts of space,” Hynard said. “Typically we would take a townhouse and lease it floor by floor. But here we’ve taken possession, refurbished the space and created a building that will be let to a single occupier.”

1 Harley Street could be converted to flexible offices for doctors.

Among the big occupiers looking for space in the area is the Cleveland Clinic, which is setting up a £1B, 324K SF hospital in Grosvenor Place because it could not find a large enough space on Harley Street. It has leased a 28K SF building for an outpatient facility on Portland Place, part of the Harley Street Medical Area, to give it a presence in the district. 

But to focus on larger occupiers creates something of a dilemma: those smaller occupiers, typically GPs, still want to take space on the street, creating a new kind of demand. To meet that, Howard de Walden is taking the innovative step of creating a series of buildings that will essentially be flexible office space for doctors. 

The first building earmarked for the strategy is the 30K SF 1-7 Harley Street, where it is having preliminary conversations with Westminster Council, with a view to submitting a planning application later this year. 

“Consultants would be able to take a license and be flexible about the space they take, but know they can have a booking system and other services they need available to them,” Hynard said. “There is demand from that sector and it is its own pocket of growth.”

Howard de Walden is also looking at setting up a specific business improvement district for the Harley Street Medical Area, to work with tenants and others property owners in the vicinity to continually improve the area’s public realm. 

Howard de Walden CEO Andrew Hynard

Unfortunately for Harley Street, when an area has a reputation for excellence in a field, it attracts people looking to tap into the halo effect. Harley Street has a long history of quacks, scammers, charlatans and criminals setting up shop there, stretching back to even before it was a medical hub. 

Hynard said Howard de Walden has worked hard to screen tenants that might tarnish the street’s reputation, and bring in leaders in their respective fields. In the 1980s and 1990s Harley Street became heavily associated with cosmetic surgery, which the owner felt did not fit the brand particularly well, so today cosmetic surgery makes up less than 4% of the rent roll. Alternative therapists with little grounding in medical science have also tried to locate in the area to profit from the Harley Street name. 

“We’ve got a good idea of the brand we’ve got, but these things fade over time unless they are watered,” Hynard said. “We’ve done a lot to improve the caliber and quality of the occupiers. We’ve weeded out some of the less desirable cosmetic surgery practices and quirky goings on that the area attracted in the '80s. Through careful analysis we’ve brought in some really cutting-edge practices.”

Howard de Walden has appointed Lord AJ Kakkar, a professor of surgery at University College London, as a non-executive director, with a specific mandate to advise on tenant mix and quality. 

Hynard points to a company called Advanced Oncotherapy, which treats cancer using advanced proton therapy, as the kind of bleeding-edge company it is keen to attract. 

In that sense he adds that Harley Street is close to and can benefit from the knowledge quarter of medical research facilities that is building up on the Euston road on its north east corner, which includes the Wellcome Trust and further away the Crick Institute.

The Harley Street Medical Area generates more than £43M in rent each year.

But the choice of which tenants to let in and weed out is not simple, and comes with pitfalls, because ethics and science are not a simple matter. 

A decade ago Howard de Walden was caught up in controversy after its then-chief executive said in an interview that it would stop practitioners who offer abortions taking space on Harley Street. The estate’s ultimate owner, the Baroness Howard de Walden, is a staunch Catholic, which led to the introduction of the policy. (As an aside, there was no bar on in vitro fertilisation facilities, even though Catholic doctrine also says IVF treatment is wrong). Processes like stem-cell research occupy a moral and ethical grey area for some people, and in almost every area of medicine and scientific research there are people acting at the edges of what some groups of society would consider ethical and moral.

“I haven’t come across that specific policy in my time here,” said Hynard, who joined as chief executive in 2016. “We would be incredibly sensitive when dealing with that area, as we would in any decision that has a moral edge. In the time I’ve been here it [a bar on practitioners offering abortion services] hasn’t come up for discussion, and I wouldn't expect it to. We take that reputational and ethical aspect seriously.

“There is a lot of research going on in areas like stem cell where there is a conversation going on between leading edge, pioneering technology and ethics. In most cases it will come down to the reputation of the company or practitioner. We are always drawing on the experts in our company, on our board and among our tenants to make sure we are supporting the best research in London.”