Michael Gove recently announced that the government is planning to sell the Pentonville building. Property specialist Simon Morris explains why this could be a fantastic opportunity for London Property developers.
The Pentonville building is located in the London Borough of Islington. Statistics from estate agents Stirling Ackroyd show that one bedroom flats in Islington are currently selling for roughly £500,000, whilst two bedroom flats are going for around £650,000 to £700,000.
Suitability of HM Pentonville
This means that if London property developers buy old buildings in Islington, they could convert them into lucrative residential dwellings. However in order to do so, they need the right old building and according to Matt Haycox, head of development consultancy at Hamptons International, Pentonville fits that bill.
Haycox was quoted by the Guardian saying that “it is most likely to be suited to a residential development and that use will almost certainly drive the highest value.” The head of development went on to comment that “likely buyers are the large London house builders who have the funds and can phase the development over a number of years.”
The area is a lucrative residential property market, and the building is suitable for residential property development, but how much wold it cost to buy Pentonville? Some developers may use the £1 billion sale of the Chelsea Barracks in 2007 as a benchmark, but experts suggest that it’s unlikely that the old complex will match this price.
The Valuation Office recently said that the price of one hectare of land (with planning permission) in Islington is £52 million. This would mean that a property developer would only pay £210 million for the Pentonville building. The price for the land without planning permission, according to experts, could be half as much.
Return on investment
Figures suggest that if London property developers bought the Pentonville structure they could build up to 2,000 residential dwellings. This means that the project would provide investors with significant return on investment, considering the price developers would have to pay to buy the complex.
However, property expert Simon Morris would note that a number of significant risks are always attached to residential property development projects of this magnitude. London property developers will take note of the sale Pentonville, its number are too good not to, but whether these risks impede their ability to turn the complex into a profitable residential property investment project, only time will tell.