This article first appeared in City & Country, The Edge Malaysia Weekly on July 15, 2019 - July 21, 2019
On a bright summer’s day at Circus West Village — the first phase of the iconic £9 billion (RM47.014 billion) 42-acre Battersea Power Station project — lively crowds of city dwellers and professionals can be seen in the restaurants, bars and shops that front the River Thames.
At the verdant six-acre Battersea Power Station Park in front of it, pedestrians, including dog walkers and joggers, are out enjoying the sunlight and the fresh air.
On a recent trip there, I learnt that the development has gained more interest, especially among Londoners, in the last couple of years. Several successful pop-ups and events, among them, the London Seafood Festival and Art Night, have been organised there, in keeping with Londoners’ fondness for cultural and artistic events.
Circus West Village has drawn a footfall of two million visitors since it opened its doors in 2017. The first phase is now home to 1,000 residents and includes facilities such as an entertainment room, café, spa and a gym, while the commercial units are 95% leased.
Battersea Power Station Development Co Ltd CEO Simon Murphy tells City & Country that there has been a staggering increase in footfall and confidence level in the project after the first phase was completed in 2017.
“The Battersea Power Station is becoming more well known, and is part of the London scene now. We are keeping up with the current trends as London is always evolving,” Murphy said during a casual chat after lunch at Fiume, a restaurant in Circus West Village owned by celebrity chef Francesco Mazzei.
To recap, Battersea Power Station is a regeneration site jointly developed by S P Setia Bhd, the Employees Provident Fund (EPF) and Sime Darby Property Bhd, that was acquired in 2012. The consortium set up Battersea Power Station Development Co Ltd and plans to capitalise on the site’s historical and iconic status as one of London’s premier landmarks.
Earlier this year, Malaysia’s largest asset management firm, Permodalan Nasional Bhd (PNB), and the EPF agreed to jointly acquire the commercial assets of the second phase of Battersea Power Station for £1.58 billion (RM8.197 billion).
The mixed-use development comprises seven phases. Phase 1 (Circus West Vilage) has been completed while the rest are ongoing: Phase 2 (the Power Station), Phase 3A (the Electric Boulevard), Phase 3B and the Northern line extension. The remaining phases (Phase 4 to Phase 7) are still on the drawing board. The development will comprise three million sq ft of commercial space and over 4,000 new homes.
First launched in 2013, Phase 1 (Circus West Village) is 99% taken up, while Phase 2 (the Power Station) and Phase 3A (the Electric Boulevard) are 90% and 70% taken up, respectively. Details of future launches are yet to be firmed up.
Given its history and iconic status, Battersea Power Station has the makings of a top cultural destination in London.
The new beat of London
Voted the No 1 destination this year in TripAdvisor’s Travellers Choice Award, London is a mecca of business, culture and diversity.
From its street markets and art galleries to independent restaurants, every corner of the city has something unique to offer. Upscale operators and tenants are found in areas such as Mayfair, Marylebone, Kensington and the West End in general while Shoreditch, Camden and Tottenham Court Road are known for their trendy hang-out spots. But what exactly is available in Battersea and how does it capture the spirit of London?
Having travelled and lived in the UK for a short while, I had the chance to observe some of the development’s progress over the years. It was not until two years ago that the area gained more buzz upon the completion of its first phase. The catchment areas for the first wave of retailers include neighbourhoods such as Chelsea and Southbank.
The Battersea Power Station forms part of the Nine Elms area of London. The Nine Elms comprises 500 acres of offices, cultural amenities and homes for 50,000 new residents within areas such as Battersea, Kensington, Hyde Park, Chelsea, Fulham and Southbank.
Meanwhile, the 200-acre Battersea Park nearby features a zoo, an old English garden, a boating lake and a local art gallery.
The first phase, Circus West Village, appears to have a highly curated list of retailers and operators, such as Cinnamon Kitchen, Fiume, Mother, The Coffeeworks Project, The Battersea General Store, Wright Brothers and Megan's. Other names include celebrity hairstylist Paul Edmonds London, Boom Cycles and Archlight Cinema.
It is clear that the existing retailers and pop-up events at Circus West Village have influenced the lifestyle of residents in Circus West Village. According to Richard, a Malaysian investor who stays there when he is in London, the development is perfectly suited for his lifestyle.
“The selection of F&B and shops here is excellent. I don’t even have to venture out to other areas to hang out with my friends here. I ask them to come here,” said the investment banker, who proceeds to show a recent video he took of the bustling first phase.
“Apart from frequenting the restaurants and shops here, one of my favourite things to do is to take a walk in the Battersea park. It is a great neighbourhood and I feel at home here. My neighbours are a mix of locals and foreigners.”
According to Battersea Power Station Development Co Ltd head of retail leasing Sam Cotton, the retailers were carefully chosen to ensure their longevity.
“For Battersea, we would like to offer something that is completely new, experiential and unlike other retail destinations in London. Thus, our brand selection is comprehensive, and segregated in phases,” he added. “We are not trying to create another ‘Westfield’ per se.”
He said there will be a good mix of upscale and high-street brands for specific phases, particularly for Circus West Village, the Power Station and the Electric Boulevard.
Indeed, one of the highlights of my trip took place in Circus West Village, where I was given the opportunity to take a floral artistry class at Moyses Stevens. One of the UK’s oldest and most prestigious florists, it holds a royal warrant from His Royal Highness The Prince of Wales. My experience is a testament to how the development veers away from standard retail conventions.
Apart from the curated retailers, the consortium plans to add more Malaysian flavour to its retail components. “For future phases, we have been in talks with several Malaysian brands to occupy our retail spaces here at Battersea. We will also have a Malaysian Square featured as part of the Power Station,” said Cotton.
He elaborated on the retail selection, particularly for the Power Station. “With tenants such as Apple Inc, we believe our retailers will be complementary to them. In addition, we will be offering unique features in our retail components such as the fully glazed Chimney Lift, which will be implemented in one of the turbines of the Power Station.”
The consortium believes the Power Station is poised to become the next hub of London.
Site progress
During the trip, WilkinsonEyre director Jim Eyre took us on a tour of the project site of Phase 2, The Power Station. Beneath the scaffoldings, parts of the original structure of the Power Station are being maintained.
“It is about balancing between the old and new,” he said, pointing to a couple of the original doors of the Power Station. According to him, the phase will have elements of Art Deco design. Meanwhile, the Apple Inc offices is also taking shape.
The Power Station will comprise the iconic turbines (Turbine Hall A and Turbine Hall B), Apple Inc offices, residential units, lounge, foyer, event box, F&B level, Control Room A and the Chimney Lift.
Apple Inc has pre-let 500,000 sq ft of the Boiler House office space in The Power Station.
Other nearby tenants in the Nine Elms include New Covent Garden Market, the US Embassy, Newport Street Gallery and publishing giants DK (formerly known as Dorling Kindersley) and Penguin Random House.
The entire project sees a coming together of architectural visionaries. While London-based WilkinsonEyre was commissioned for the Power Station, Foster + Partners is in charge of the designs of the Phase 3A (the Electric Boulevard) — Battersea Roof Gardens and the Skyline building.
Meanwhile, Gehry Partners is responsible for another part of Phase 3A — Prospect Place and the Flower Building.
The Flower Building is the development’s most expensive building yet, with 1,305 apartments priced from £495,000 to £3.2 million for 4-bedroom units. The prices of the penthouses for the Flower Building are only available upon request.
According to the consortium, the construction of the project is on track and both Phase 2 and Phase 3A are slated to be handed over in 2021.
Steady demand
The demand for the residential units at Battersea Power Station remains steady despite challenges. According to Battersea Power Station Co Ltd chief financial officer Benn Zemek, the residential projects achieved about £120 million (RM634 million) in sales in the last 12 months. “Our sales performance remains relatively strong despite the drop in the [property] market. There is an average blended uplift of 36% (on resales) since the launch date,” said Zemek.
“For the completed first phase, Circus West Village, there is also a good demand for rentals, and it outperforms the London prime market,” he added. According to JLL, the rental growth in 2019/2020 in the Nine Elms area will be 12% as opposed to 7% for central London.
“We have done exceptionally well. For the first phase, we have sold about 99%, followed by the second and third phase [90% and 70%, respectively]. The ongoing progress gives our buyers the confidence. Frankly, there are not a lot of units left, and the ones that are still on the market are mostly higher-priced units, for example, the penthouses and so on,” said Battersea Power Station’s Murphy.
“The London property market is cautious, and it has been that way for a while. Nevertheless, our focus is on what we can control, which is to ensure that the Battersea Power Station is a great place and an attractive proposition for our purchasers. So far, there has been a good mix of investors and owner-occupiers.”
Brexit and other challenges
Murphy acknowledged the challenges in the the market. “Regardless of external factors such as Brexit, our sales have done well and were not affected. In fact, for overseas purchasers [since their currencies have gained strength due to Brexit], we sold more units to them,” he said.
“Due to Brexit, properties at Battersea have become 10% to 15% cheaper [for foreign buyers]. We have benefitted and not suffered negatively from Brexit,” he added.
Notwithstanding the challenges, London remains a top property investment destination. According to Knight Frank Wealth Report 2019, it remains the No 1 global wealth centre, knocking New York into second place. “Activity [in London] will strengthen once political uncertainty with regard to Brexit starts to recede and pent-up demand is released, with growth forecast at 1% this year,” the report says.
Meanwhile, despite reports of delays for the later phases of Battersea Power Station, the situation appears to have been resolved. “Our second and third phases were slow to start, but we have renegotiated contracts with our purchasers [for those phases]. The units that were returned to us, we have managed to put back on the market, but most of the purchasers stayed on because they believe in the project,” said Murphy.
“We have dealt with the situation and informed our buyers about when their units will be delivered. We are confident that within the next two years, Phase 2 will be done, Phase 3 will be nearing completion, and our Northern line extension will be completed. The delays are behind us, and we can now focus on our existing and future purchasers,” he added.
“Another thing that is behind us is the cost overrun, which was well publicised in the last two years. It happened for a myriad of reasons, such as inflation, the changing of the design and so on. We have now gained more stability in the last year. We are largely procured, which gives us more certainty,” he said.
In terms of the target market, Battersea Power Station has attracted a good mix of local and foreign buyers. “For Phase 1, most of our buyers are UK nationals. The British like buying things that they can see. But for the rest of the launches, especially Phase 3, it is about half and half (local and foreign buyers).”
“Ultimately, our goal is to create a great community and a mixed-use development that is exciting. People here are excited by the fact that the transport links are going to be improved, and there will be incoming major tenants such as Apple Inc. We are confident we will continue to do well, and this will be a good return of investments,” said Murphy.
“Moving forward, our focus will be delivering all our immediate phases (Phase 1 to Phase 3A) and the Northern line extension, as Phase 1 is already open and thriving. We will also be focusing on the development solution for the rest of the site,” he concluded.
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