The Inside Story Of The £1B Mixed-Use Scheme Quietly Rising In West London
The rumour spread like wildfire around the BCSC conference in 2013. The Sultan of Brunei had made one of the most unlikely retail purchases in living memory, paying Standard Life £115M for the tired Whiteleys shopping centre in Queensway, West London.
Today he is persona non grata due to new laws making same-sex intercourse punishable by death, but back then the deal was seen as a shot in the arm for a shopping centre market still emerging from the financial crisis.
Before long, the rumour was scotched, and it emerged that retail specialist private equity firm Meyer Bergman had swooped in at the eleventh hour to buy the centre.
The story of how the deal came about is fascinating, but so is the scheme itself: The history of Whiteleys and what it is to become is a microcosm of retail evolution over the last 150 years.
Nearly six years on, and with little fanfare for a project of its size, the firm is in the middle of a massive redevelopment of the grade-II listed building that will have taken almost a decade, cost £1B and completely transformed the centre.
The proposed scheme, designed by Foster + Partners, will see a 250K SF shopping centre transformed into a new scheme comprising 140 luxury residential apartments, 13 affordable homes, a 50-bedroom hotel, and 120K SF of commercial space including a gym, cinema and ground-floor retail and restaurants.
In many ways, the seeds of the deal were sown long before Meyer Bergman’s purchase, and were very personal, the firm’s chief executive, Markus Meijer, told Bisnow.
“I lived in the area, and every time I went there I saw the beautiful facade, beautiful spaces, the fact that it occupied an entire city block, and I thought it would be an amazing opportunity to redevelop this building in a way that fits its history better than its current design,” he said.
That history and what was then the design sum up retail in the 19th, 20th and early 21st century. The building was originally a department store, opened in 1889 by William Whiteley, a draper who grew his retail business to such an extent that it eventually took up a whole block. At the start of the 20th century it was one of London’s three largest department stores along with Harrods and Liberty.
Post World War II its fortunes declined, and the upper two of the original four floors were converted to offices. The department store closed in 1980, and the lower floors were converted to a shopping centre that opened in 1989.
But by 2013 that shopping centre was going the way of the department store that preceded it. Whiteleys is positioned roughly halfway between Oxford Street to the east and the behemoth of Westfield London to the west, both of which stole away shoppers, meaning it was 20% vacant when Meyer Bergman bought it. The firm spotted a chance to use the historic structure of the building, but move it away from its historic use.
The deal came about because a group of private investors — one from Brunei but not the sultan — had exchanged on the deal but could not raise finance to complete the purchase. Meyer Bergman stepped in and bought the contract and got the chance it had been waiting for.
The listed facade will be retained, as well as elements of the original asset that are of architectural interest, like an original staircase from the department store, and the listed dome of the original building has been carefully removed and will be replaced as the highest point of the new scheme. But essentially everything behind the facade will be demolished by Q3 of this year, and a new eight-storey structure will replace the existing four storeys, with completion scheduled for 2022.
“All of the windows on one side on the upper floors were totally blocked off and didn’t open to the outside world,” Meijer said. “And the original ceiling heights were 4.5 metres on the first floor and 6.5 metres on the second floor, which gives you incredible space to work with.
“Standard Life had tried to revitalise it, but retailers had moved out, and there was no real sense in having a shopping centre between Oxford Street and Westfield London. The principle was always to reduce the level of retail.”
And so the move to a mixed-use scheme. There will still be retail on the ground floor, but only around 49K SF, along with 22K SF of restaurants and cafés. There will be a 22K SF cinema in the basement, a 30K SF gym on the first floor and the hotel and residential elements will account for the remaining floors.
Meijer said the hotel and gym in particular filled a gap in the market in the local area.
“There is no large, well-known gym operator in that part of London," he said, "and we wanted to anchor the building with a hotel for the same reason: there is currently not much to choose from in the area.”
A high-end residential development manager, Finchatton, has just been appointed, and a hotel operator is to follow soon.
The hotel will provide services to the apartments, a growing trend in high-end residential, and this was part of the thinking behind the choice of Finchatton as development manager: The company’s 20 Grosvenor Square scheme in Mayfair will see the apartments serviced by Four Seasons.
“It’s something more and more people are doing, and we wanted to bring that here. We wanted to bring a well-known brand in because hopefully when you are looking at buying the residential, that gives you confidence," Meijer said. "That is why we are bringing in the hotel and the gym operators early. The cinema, retail and restaurants can come later.”
Meijer said the residential element of the scheme will not be looking to achieve the same kind of prices as Finchatton’s other major scheme at Grosvenor Square.
“We think the scheme will appeal to people who live in London, maybe in a three-story townhouse, and want to move somewhere with amazing amenities like a gym or the hotel services, still want to live in a beautiful building, but don’t want to have to dig a massive basement. You have to adjust your pricing to what people in London consider appropriate. So lower than Grosvenor Square, but higher than what is in Queensway at the moment.”
He acknowledged the market for high-end residential sales in London is tough at the moment, but argued that good schemes still sell for good prices.
“In a soft market, the things that still sell are the ones that tick all of the boxes,” he said. “Schemes that are poorly configured or in the wrong locations are the ones that are suffering, not selling or having to be heavily discounted. We think we have something unique, a historic building with the best operators and amenities.”
From department store, to shopping centre, to residential-led mixed-use scheme. It is the retail journey in a nutshell. Of course not every retail scheme has the advantage of being in a wealthy area of west London. But Whiteleys is the past and future of a sector that is constantly changing.