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London’s hotel-style apartments see record-breaking price increases

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The number of apartment buildings with lifestyle facilities that rival 4 and 5-star hotels has risen dramatically over the last 10 years. From their original heartland in Knightsbridge these luxury buildings have expanded their presence across Central London. 

In the eight inner-most districts there are now 38 buildings providing some 4,000 hotel-style apartments. Developers seeking record-breaking prices are delivering exceptional levels of luxury and service. This luxury apartment market has the potential to provide serious competition for the serviced flat and hotel sectors. These are just some of the findings of a new report from leading estate agent Kay & Co.

The ‘New Apartment Buildings Rival Luxury Hotels’ report was commissioned by Kay & Co with data analysis undertaken by Dataloft, the market intelligence group. It used Land Registry, Kay & Co data and local market intelligence to analyse some 4,000 prestige apartments built in Prime Central London over the last decade.

In order to quantify this market the report devised a hotel-style star-rating system for the new PCL developments (see methodology at end of press release). Ten lifestyle criteria were used to award points to developments based upon the presence of certain features and amenities. The star-rating criteria had a maximum of 50 points. A 1-star development scored under 5 points and provided a concierge and good local amenities. A 2-star scored 5-14 points and benefited from a concierge, parking and local amenities. A 3-star scored 15-24 points with concierge, outside space and local amenities. A 4-star scored 25-34 points providing concierge, outside space, local amenities, gym/spa and/or business suite. A 5-star scored 35-50 points providing concierge, outside space, gym/spa, cinema, wine cellar and swimming pool. The report mapped 38 developments: 10 were allocated 5 stars; 9 four stars; 10 three stars; 7 two stars and 2 one star.

The 4 & 5-star developments were historically clustered in Knightsbridge, then expanded into Mayfair and Belgravia. However in recent years developers have delivered ultra-prime products in Fitzrovia, Westminster, Bayswater, Marylebone and the Hyde Park Estate. The number of 4 & 5-star rated developments has risen dramatically. There are now 1,083 5-star rated apartments in London with a combined value of over GBP2.4 billion. The proportion of apartments achieving these top grades has risen steeply in the last 18 months from 60 per cent to 74 per cent of all new PCL developments. More 5-star apartments are due to be completed in 2015 and 2016 than in the 10 previous years combined.     
                                                                                                                        
The report highlights that the focus of luxury pipeline development is along the Northern and Western boundaries of London’s West End. Eighty-one percent of all 5-star apartments scheduled for completion in 2015 and 2016 are in Fitrovia or Marylebone, and some of the most recent luxury projects unveiled or in the pipeline are in the Hyde Park Estate and Bayswater. 

An analysis of London’s top-10 5-star developments also underlines the expansion of the hotel style apartment concept outside of its historic Knightsbridge heartland. Whilst, perhaps unsurprisingly, the report’s top two developments with the highest amenity scores are One Hyde Park and The Knightsbridge, other projects in the top-10 include The Chilterns and Chiltern Place, both in Marylebone; Riverwalk in Westminster; and Rathbone Square and Fitzroy Place, both in Fitzrovia.

The report also reveals that there has been a significant lack of new luxury apartment development in Chelsea and Kensington. Of the 38 developments reviewed in the report, only two are in Chelsea proper, with two – Chelsea Barracks and Grosvenor Waterside – being on the border with Pimlico. There is also an emerging “North-South divide” across central London in terms of types of apartment offering. To the South, there is a swathe of 1, 2 and 3-star apartment buildings running parallel to the river from Chelsea to Westminster. To the North there is an arc of 4 and 5-star buildings running from Knightsbridge, via Bayswater and the Hyde Park Estate, to Marylebone and Fitzrovia.

The presence of Royal Parks near to five star rated apartment buildings is notable. Of the ten developments rated five star in the report, eight are in the vicinity of either The Regent’s Park or Hyde Park. The south of Hyde Park is home to a cluster of five star developments such as The Knightsbridge, Lancelot Place and One Hyde Park whilst the popularity of Fitzrovia, the Hyde Park Estate and Marylebone may, in part, be attributed to their easy access to parkland.

The report highlights the rise in global wealth has resulted in a demand for lateral apartments with hotel style facilities by international investors from the Middle East, Asia and Africa. Many wealthy overseas buyers are used to hotel style apartments in their domestic countries and want to acquire the same product in London. The success of projects such as The Knightsbridge and One Hyde Park has encouraged developers to stretch the boundaries of specification, amenities and pricing to offer not just a home but a lifestyle.                                                                          

As a result, prices paid for new build apartments in central London has increased at an astonishing rate. The average price of a hotel style apartment in PCL has risen 341 per cent from GBP511,000 in 2009 to GBP2.25 million in 2014-15. New apartments with hotel type amenities now sell at a 62 per cent price premium compared to second-hand conventional apartments.

Three key conclusions can be drawn from the report. Firstly, this new generation of luxury apartments has the potential to cut across the serviced apartment and traditional hotel sectors. Over the last few years global economic turbulence has driven some ultra-high-net-worth investors to mortgage their luxury 4 and 5-star rated apartments, release cash from them, and place them on the rental market in order to generate income. This has the potential to compete with the existing serviced apartment and luxury hotel markets.

Secondly, these new apartments are creating a new style of city living, where residents have access to concierge facilities, gyms, swimming pools, spas, retail outlets, in-room dining and valet parking. Thirdly, success is driving expansion of these projects into new areas to the North of London’s West End creating a new prime London region. Over the next five years we can expect to see more 3, 4 and 5 star rated projects in Euston, Kings Cross and Paddington.

Martin Bikhit (pictured), Managing Director of Kay & Co commented “Go back a decade and there were around half a dozen luxury apartment buildings with hotel style amenities most associated with Knightsbridge. Now global demand, rising prices and excellent developer standards have resulted in a huge expansion of this hotel style apartment offering. There are now some 4,000 of these apartments, 1,083 5-star rated, located across eight Central London districts. A key trend has been an emergence of these projects to the North of the West End in locations including Marylebone, the Hyde Park Estate, Bayswater and Fitzrovia. This is in the heart of our Kay & Co operating area. Over the next five years we can expect to see more 3, 4 and 5 star rated projects in locations including Euston, Kings Cross and Paddington. A new prime London region is emerging.”

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