Battersea worth extra £470m if demolished

London’s decaying Battersea Power Station site would be worth an extra £470 million (€566m) to a developer who could demolish the protected building itself, according to calculations done for Reuters by property consultancy EC Harris.

The extra cash would boost the viability of a stalled scheme central to the creation of 25,000 jobs in the wider area, as Britain’s economic outlook darkens.

Nama and Lloyds Banking Group own the 38-acre (15-hectare) site, which has seen repeated failed redevelopment attempts in the three decades since the power station closed.

The site goes on sale again next month after the collapse in December of the latest scheme — a £5.5bn plan for homes and offices based around the derelict riverside edifice.

That plan, by Irish developer Treasury Holdings, was approved by local government and included 3,611 homes as well as shops and offices on the site and inside the shell of the building.

EC Harris calculates that after demolition and based on current density plans for housing, a developer could build 1,200 apartments where the building stands and sell them for an extra £470m.

Flattening Europe’s largest brick structure and its four chimneys would save estimated renovation costs of about £500m, roughly equivalent to the cost of demolition and apartment construction combined.

That would leave the £470m proceeds as an extra “cushion” of profit for any developer running the numbers on the site, according to EC Harris numbers.

“The site has been through four economic cycles and development after development has failed,” said Mark Farmer, head of private residential property at the consultancy.

“You have to ask yourself at what point concerns about its heritage are outweighed by what is truly economically viable.”

Battersea, a coal-fired power station that was closed in 1983 after 50 years in service, is expected to draw interest from the Far East, Russia and the Middle East and formal sales documents are due to go out via agent Knight Frank next month with a price tag of about £300 to £400m.

That price could leave Lloyds and Nama out of pocket. They took control as creditors reportedly owed between £400 and £500m, after the latest scheme collapsed late last year.

The former power station became a failed symbol of regeneration in the 1980s under then prime minister Margaret Thatcher, and has already repeated the trick on Prime Minister David Cameron who chose it as the backdrop to his election campaign in 2010.

After backing the extension of London’s Underground rail network to Battersea, a crucial step towards its viability, chancellor of the exchequer George Osborne said the site would help create 25,000 new jobs in the wider area in November.

However, after so many years without a successful redevelopment project, the prospect of demolition is now openly discussed.

“The way people are talking, the likelihood of demolition is increasing,” said Neil Bennett of Terry Farrell and Partners, which has drawn up a proposal aimed at keeping heritage bodies and developers happy.

The proposal removes a plan for 180 homes inside the structure that would cost £600m, and would instead see the building left largely untouched and surrounded by a park.

The final decision would be taken by the department for culture, media and sport and getting a revised scheme through the planning could take several more years.