The value of shops and houses in Chelsea is nearing rock bottom, according to the boss of one of central London’s oldest landlords.
“Over the past two years retail values have fallen by about a third . . . I now expect that to stabilise,” said Hugh Seaborn, chief executive of Cadogan Estates, which owns upmarket shops, apartments and offices across 93 acres of Chelsea and Knightsbridge in west London.
Overall, the value of the 300-year-old, family-owned estate dropped 14 per cent to £4.8bn last year. Retail was the main drag, with valuations plunging by a quarter over the year.
The company owns more than £1.5bn worth of housing stock in Chelsea, which it rents out. The value of that housing has ebbed since the market for expensive central London homes peaked in 2014, falling by 23 per cent in seven years.
Many of those on short-term rental contracts have vacated properties during the Covid pandemic, which then remained empty. Gross rents across Cadogan’s residential portfolio fell by 9.1 per cent to £30.1m in the year, and the value of the portfolio fell 5.7 per cent. Operating profits fell 8 per cent year on year to £97m.
But Seaborn was confident that valuations for both houses and shops on the estate were reaching the bottom, pointing to renewed interest in storefronts on the Kings Road and Sloane Street and a recent upturn in inquiries for homes to rent.
“We know that retailers require fewer shops, but they still require bricks and mortar stores to convey their brand,” he said.
Coronavirus has had a similar impact on neighbouring estates, emptying high streets across central London of tourists and sapping value from the properties owned by groups such as the Crown Estate, Grosvenor Estate, Capco and Shaftesbury.
Landlords are increasingly having to offer direct support or lease negotiations to shops, bars and restaurants to ensure their tenants survive.
Cadogan has paid out more than £20m to struggling tenants over the past year and has overhauled lease structures for some of those hardest hit by the pandemic.
Hospitality businesses, which have been forced to shut through much of the last financial year, have struggled to meet rental obligations and Cadogan said on Wednesday that it had amended payment plans for those businesses so that they pay a portion of the turnover rather than a fixed rent.
The landlord has looked to reinvent its Chelsea estate in a bid to tempt back shoppers. Over the past year it has worked with the Royal Borough of Kensington and Chelsea to pedestrianise Pavilion Road and has installed 900 alfresco dining seats, an innovation Seaborn expected to stick for at least some of the year. “The alfresco seating might be seasonal, something we roll out when the sun comes out,” he said.