Gotham City

M&G Prudential to invest £875m in the London office project that has been dubbed Gotham City.   

The insurers investment arm, M&G Prudential will invest in the City of London development site where it plans to start work on a new skyscraper next year despite Brexit uncertainty. M&G Prudential has bought the development nicknamed “Gotham City”, the group announced on Monday. The site includes three existing buildings that will remain unchanged as well as further buildings that are already undergoing demolition to prepare for the construction of a 34-storey skyscraper, as well as a smaller tower of 14 storeys.  

The combined space of the two structures equals 905,000 square feet of space.  “The supply of new offices in London is pretty limited over the next four to five years — probably lower than for some time,” said Tony Brown, head of M&G Real Estate. “We are going to provide a Grade A building at a time when few others are doing so.” He said construction would begin in about March 2020 with completion due in 2023, regardless of the outcome of Brexit discussions. 

Investment in central London offices dropped more than 40 per cent to £5.8bn in the first eight months of 2019 from £10bn the previous year, according to property agents CBRE. Concern over Brexit has deterred some developers from going ahead with projects. As stated by Mr Brown, “The main reason is because of the political uncertainty caused by Brexit, leading to a dearth of overseas buyers in the market at the moment.”  

However, investing in London, compared with other cities is good value, as Mr Brown observes, “On a relative value basis, the prime London office market offers discounts of at least 100 basis points to prime office markets in places like Paris, Frankfurt, Tokyo or New York. That relative value, in terms of pricing, is probably wider than it has been for a long time.” 

The development will include two new towers of 34 and 14 storeys. The 34-storey tower features stepped blocks and “recalls the classic North American skyscrapers of the early 20th century,” according to the architects.  Good news for the environment, as the carbon emissions of the buildings will be 30 per cent below levels required by current regulations, M&G said. 

The site was acquired by M&G Prudential from the investment manager Nuveen, part of the Teachers Insurance and Annuity Association of America, and Canadian pension fund AIMCo, which had planned to finance the development through a deal with four Hong Kong property companies, which fell through. However, Nuveen will remain the development manager.  Crucially, the design for the new buildings, by Make Architects, has already been granted planning permission.