Earls Court: A big hole in West London

It should come as no surprise that Capco, the owner of much of Covent Garden and the Earl’s Court development site, is looking to split into two separate companies. The fortunes of the two areas have been heading in very different directions over recent years, with Covent Garden more than doubling in value since 2013 and Earl’s Court declining from a value just shy of £1.4bn in 2015 to around £1bn in 2017. 
Capco, which originally emerged from Liberty International, has been an exemplary place-maker in Covent Garden and the valuation reflects that. It is mainly commercial, but with a decent slab of high-end residential stock which has flown out the door to wealthy buyers who want be in one of London’s best locations for street life and entertainment. Perhaps most importantly, the income from Covent Garden was going to be used to finance the Earl’s Court Scheme.

Earl’s Court, on the other hand, has suffered from timing issues and pure size. Conceived, assembled and bought when the residential market was on a tear, it is 77 acres – huge in London terms, and even bigger than the Cadogan Estate. The exhibition halls have gone and it is now a clean slate, with the exception of Lillie Square, which is on the other side of the Brompton Road and now mostly built and sold. But the project has been beset by problems – stamp duty hikes most noticeably – and also clashes with Fulham Council, which has recently changed its political hue. 

The scheme covers more than 7,500 homes, but the pace of sales has been glacial; only one unit a week recently. At that rate it will take 140 years to sell – bringing about a real danger that Earl’s Court’s increasing weakness would drag down Covent Garden and make Capco vulnerable to a takeover.

Also worth a mention here is construction cost inflation, which has been huge since Capco amassed the site. The ultimate victim will be land value and profit no doubt, but eventually someone will make it a success: after Capco has stomached the enormous financial pain, the scheme may yet emerge like a phoenix.
From the outside, the Earl’s Court project looked to be a great example of what could be done on a large scale with a mix of residential and commercial: urban regeneration at its best and in contrast to the soulless towers of Paddington Basin, for instance. But it is going to struggle against an ebbing tide of demand from Asia, a site value that will probably have to be written down further and the George Osborne-introduced own-goal of punitive stamp duty. In the meantime London has lost its prime exhibition halls and there is a huge hole in that area of West London, which is going to take some time, deep pockets and big cojones to fill. What a shame.