Hollywood is helping London developers weather the financial crisis by turning empty offices into film sets, providing cash and publicity for landlords struggling to fill buildings with tenants because of the uncertain economic outlook.
In addition to films and television shows, a growing number of developers are also opening their doors to events like London Fashion Week or temporary retail sites for online companies such as Amazon, eBay and Google.
Others are planning to cash in on short-term demand from film crews seeking rooftops with panoramic views during the Olympic Games and celebrations marking the 60th anniversary of Queen Elizabeth II’s coronation.
“There has been a sea change in the way landlords deal with empty space since the financial crisis,” said Mark Hughes-Webb, managing director of SPACE-2 Consulting, which finds buildings for shoots and events. “They are more focused on cashflow as shareholders want to know they are working their assets.”
Developers have struggled to fill a series of striking new buildings meant to attract a wave of tenants: five skyscrapers in central London at varying stages of build have signed one office deal between them.
The office vacancy rate in London’s main financial district was 7 percent in January, double where it stood at the end of 2007, its last low point, data from property consultancy CBRE show. SPACE-2’s turnover has almost doubled over the same period.
Spooks and spoofs
Two neighboring office blocks near the Bank of England in the main financial district have the equivalent of eleven soccer pitches of empty space between them.
One is Cannon Place and though reportedly close to signing its first tenants, Hughes-Webb said it was the venue for a new BBC spy drama, the type of shoot that can raise 1,500-7,000 pounds ($2,400-$11,100) per day. SPACE-2 takes about a quarter of any fee.
“We choose the right events to keep Cannon Place in the public eye and associated with quality brands,” said Mark Swetman, project director for Cannon Place developer Hines, saying good publicity was a bigger consideration than money.
The other block is the Walbrook building, which was used to shoot the latest film in the spoof spy series Johnny English. In the real world, it has been empty for two years and wealth manager Schroders pulled out of a move there in December.
Film shoots raise similar amounts to TV productions and it is not only buildings in the best locations that benefit. New Batman film The Dark Knight Rises includes a stunt sequence shot at an office block in the south London suburb of Croydon, with the area’s dour 1960s architecture doubling up as Gotham City.
Not all landlords are opening their doors. Western Europe’s tallest skyscraper, the 1,016-feet Shard nearing completion next to London Bridge train station, turned down makers of the new James Bond film Skyfall, which has been filming near the Tower of London, even though it has not yet signed an office tenant.
“It is disruptive. We do not need those kind of gimmicks,” a spokesman for developer Sellar Property Group said.
Conferences and events can raise even more. London Fashion Week netted landlord Land Securities more than 10,000 pounds when it set up one of the longest catwalks ever seen in London at the One New Change retail and office scheme next to St Paul’s Cathedral this month.
One of the fastest growing sources of new revenue is internet retailers like eBay setting up temporary stores to build trust with shoppers wary of buying goods online. Landlords can fill space for between one week and six months and demand for space far outstrips supply , Hughes-Webb said.
Australian developer Lend Lease did 20 temporary lettings across three British shopping centers last year to plug gaps left by failing retailers, something that would not have occurred to developers five years ago, said Simon Donaldson, head of retail operations.
“Not only did it bring in several hundred thousand pounds extra in rent, it saved more than a million pounds in empty rate liabilities,” he said.
Owners of buildings with panoramic rooftop views plan to cash in on demand from camera crews looking for sites during this year’s Olympic Games and Diamond Jubilee events. Fees will likely double from their norm to 300 pounds per hour, Hughes-Webb said.
“It should not have taken the recession for developers to get more creative and work out there is cash to be made,” he said, citing a small patch of roof on a building north of London Bridge that is frequently used to film crowds of commuters.
“That square meter is probably the most valuable piece of real estate in London.”