Restoring some soul to the heart of the City

FOR ONCE, the estate agents are guilty of understatement. The five luxury pounds 160,000 flats to be carved out of a narrow Victorian office building at 74 Cornhill are even closer to the City's heart than the "two minutes to Bank of England" that the brochure suggests. To the City's quarter of a million commuters, the thought of a one-and-a-half-minute walk home to the Jacuzzi and a cool drink on the roof terrace at the Powerhouse must be seductive.

Planning permission was given last week for the first residential development in recent times in the conservation area at the City's core. The decision could be seen as part of a vision of environmentally friendly, sustainable development, balancing needs of business and residents.

But the permission also reflects the reluctant realisation that banks and even professional firms' requirements for uninterrupted space and extensive wiring mean that cramped or listed sites on the City's partly medieval street plan have limited value for commercial use.

Such worries will be far away for the owners of the penthouse flat at 74 Cornhill, as they savour the sensation of stepping out on to a kind of magic carpet floating between Sir John Soane's Bank of England, the soaring NatWest tower and the outlandish tubes surrounding the Lloyd's building. Their neighbours will be banks, insurance companies, and the smart shops around the London International Financial Futures Exchange. It is a good place to live if you want to replace your Louis Vuitton tie case or reinsure your oil rig at 5.30pm on a Friday evening.

Returning inside (fifth floor - no lift but a fine staircase), they can prepare to entertain friends or clients in a compact but well-appointed reception room (16ft by 11ft) from the fitted kitchen (all machines included) with supplies from the bijou Victorian Leadenhall Market (turbot and samphire in season). Marks & Spencer in Moorgate is a short taxi ride away, and there will soon be a Tesco Metro at Bank.

"The City is a great place to live," says Graham Wallace, head of media relations at TSB. He has owned a flat in the Barbican, home of the late Labour leader John Smith, various media folk and an apparently increasing number of retired people, since 1981.

"Parking's pounds 800 a year, but after 7pm the traffic's gone and you can be in the West End in 15 minutes." Other residents say the anti-terrorist "ring of plastic" traffic control has made the City more pedestrian-friendly than much of London.

However, residents of the Powerhouse may find themselves retiring to the bedroom (14ft by 10ft) rather early. The inner City does not yet offer all the delights of inner urban living. The Chinese restaurant just up Cornhill shuts at 8.30pm and does not do takeaways. The Jamaica Inn stops serving food at 8pm. Stephen Bull's Bistro and pavement cafes over by Smithfield can get busy with Barbican theatregoers, but it is a bit of a walk from Bank. Dropping in on the neighbours, including the Bank Governor, Eddie George, is probably not welcomed.

But the mature single people who are the likely occupants may not mind, says Michael Collins, managing director of the developer, Goldcrest Homes. "More and more we and other firms are seeing the results of a very high divorce rate. The typical buyer sells the big family house in Gerrards Cross, buys the wife a cottage near the kids' schools and moves back into a flat near work like this."

Kevin Gray, who is selling similarly priced but larger flats at Dingley Place, on the City's Islington fringe, has a less sad-sounding clientele. "We have sold to an opera singer, a young guy in the money markets and a Frenchman wanting a place in London."

Mr Collins, who spends his weeks in Mayfair and weekends in Surrey, says: "Our target is also company and professional people, who work very long hours and need a pied-a-terre, because a one-hour commute just isn't on.'' The flats will also be marketed in Singapore to overseas executives and investors.

However, Michael Cassidy, chairman of the Corporation of London's policy and resources committee, expects the sale of 74 Cornhill for pounds 400,000, at an auction where Goldcrest was the only bidder, will prove to be a one-off.

Mr Cassidy, still celebrating last week's decision by Deutsche Morgan Grenfell to stay in the City rather than go to the Docklands, says: "Residential use has had a role in our planning for 12 years, but our main objective is still to build on the success of the City as a commercial centre."

Recent residential developments on the City's fringes and inside such mammoth new office sites as Alban Gate have increased the City's population slightly from its post-war plateau to about 6,000. But those residents are swamped by the 14,000 business representatives that the Corporation, unlike other local authorities, allows to vote.

"We are not like Westminster, where the council is dominated by residents and is gung-ho for more residential use. Residents want peace and quiet, not cranes," says Mr Cassidy, who lives in the Barbican but says he personally likes a few cranes on the skyline.

He feels there is much to be said for encouraging development on the City's fringes, where companies like Regalian and Metropolis have developments. "I'm trying to avoid the City being a superb centre of wealth and privilege surrounded by deprived inner London boroughs like Hackney and Tower Hamlets."

The City will not turn into an area of dwellings while any site with more than 1,000 sq ft per floor can earn more as offices than as flats. Five floors at pounds 20 a square foot, capitalised on a 10 per cent yield, prices the building at pounds 1m.

That would mean a developer would pay pounds 200,000 per flat before conversion costs, and according to Mr Collins, that is not worthwhile. Commercial rents would have to fall a lot further before residential use would look attractive.

Looking across the road from 74 Cornhill at the nearly 4,500 sq ft of lower ground-floor space available at between pounds 6.50 and pounds 10, however, it seems rents might indeed reach that point.

On the corner, National Westminster Bank's huge, partly listed "triangle" site has been empty for about three years since the staff was moved to less classy locations.

But even though the Corporation would like to see residents take up odd- shaped surplus space, few City types will want to live in basements and banking halls with only the security guards for company.