With Ace sale, Shoreditch takes center stage
27 APRIL 2015 7:46 AM
Shoreditch has for several years been London’s “it” district, but now a strong supply of hip brands is propelling it forward.
REPORT FROM ENGLAND—East London has experienced dramatic change in recent years. And while districts such as Hackney, Wapping and Whitechapel have become trendy and invested, no one area enjoys the sharpened influx of recent capital as does Shoreditch.
The area includes Hoxton Square, where the area’s gentrification began, and the Old Street Tech City area, London’s relatively new nexus of computer-based start-ups.
It might be too early to suggest Shoreditch should strike out on its own, but sources say the area has its own unique business drivers.
Adam Wilson, VP of Northern European transactions in business advisory company JLL’s London office, said Shoreditch stands on its own.
“It is most distinctly a submarket around The City with its own drivers and phenomenal growth. The area includes 15 million square feet of office space and 7,000 new homes, so it is like having a new Canary Wharf but far closer to the city,” he said.
The latest jump into Shoreditch’s fortunes was the 31 March sale of the Ace Hotel London Shoreditch by United States private-equity company Starwood Capital Group to private capital firm Limulus Limited for £150 million ($222 million), or £580,000 ($858,610) per guestroom. This single act, according to sources, catapulted Shoreditch to a new level.
Starwood Capital Group held the real estate the hotel occupied for less than three years. The 258-key hotel itself opened only in September 2013.
Simone Truscello, the Ace Hotel London Shoreditch’s director of revenue management, said he has seen phenomenal growth to the area.
Underlining the area’s corporate business uptick, he said Shoreditch had “more cranes than any other site in London.”
“Investors looking at the Ace saw all of this. A few thought (Shoreditch) might have a little too much supply coming, although these are new, exciting hotels that in our view and that of (most) buyers will outweigh those concerns and comfortably service extra supply,” Wilson said.
Other hotel groups occupying the higher ends of the industry spectrum also are coming into the area and will play into further gentrification and higher industry metrics.
Supply in the area has not increased much in recent years, but that is set to change radically. The 200-room M By Montcalm Shoreditch London Tech City, a new brand from The Montcalm Hotel Group, opens on City Road 15 April. And in January the budget, design-led Z Shoreditch opened with 111 keys in the former 1888 Alexandra Trust Dining Rooms, the original purpose of which was as a food bank.
Other high-profile projects in the works include:
- Art’Otel Hoxton: In Hoxton Square, where the East London hipster scene started, this 18-floor, 350-key property will be PPHE Hotel Group’s first U.K. Art’Otel property when it opens most likely in 2016.
- CitizenM Shoreditch Village: With 211 keys, it will be chain’s first in Shoreditch when it opens later in 2015.
- Gansevoort: Announced in January 2015, this 120-key property will open in late 2015 on Curtain Road, with a rooftop pool and approximately 6,000 square feet of event space;
- Nobu Hotel Shoreditch: Part of the empire of restaurateur Nobu Matsuhisa, this 156-key hotel will open in first quarter 2016 on Willow Street.
- Old Street Magistrates Court Hotel: This 5-star, 128-key hotel (the seventh for U.K.-based Courthouse Hotels and its fourth in London) will renovate a former courthouse and police station and open by the end of 2015.
On the up and up
STR Global’s MD Elizabeth Winkle pointed to the area’s significant improvements and increases in its housing stock and prices and a noticeable surge in investment activity.
“It has seen more corporate demand, which (at the moment) is concentrated due to the limited number of hotels. Rising occupancies will lead to rate opportunities,” Winkle said. “From a hotel perspective, it also already has its own identity.”
Ace’s Truscello said rates are ramping up quickly, with midweek trade high due to the proximity of The City and an increase in business from non-domestic customers interested in Shoreditch’s trendy atmosphere and Londoners themselves at weekends. He added that weekend trade, which he said Ace helped shape, remained a “strange beast.”
“Both our qualified and unqualified corporate business is accustomed to the fact that a Tuesday night rate will be high,” Truscello said.
JLL’s Wilson said new infrastructure projects will further influence the area, most notably the massive Crossrail transportation project.
“(The) Ace (Hotel) attracted well-capitalized investors around the globe. A couple of years ago, we would have struggled to get investors excited in the area, but (between then and now) the pace of growth has been so rapid. We see no distress in the area. It really is a gentrification story, and my colleagues are seeing record rents (for other real estate segments) comparable to The City. For example, Amazon is moving into 400,000 square feet of space on Principal Place on the corner of Curtain Road and Worship Street,” Wilson said.
Winkle not only hails Shoreditch’s proximity to The City but also its closeness to Canary Wharf, London’s latest financial center, which began life only in the 1990s.
The one source market Shoreditch lacks, according to Truscello, is Northern U.K. leisure business coming to London mostly for theater, but that would most likely change when the current pipeline opened, he said.
“The area is generating capacity, and the more that happens, great. It’s going to be cool,” Truscello said.