London’s property wave is swamping the world’s oldest profession. The central Soho district’s prostitutes and sex cinemas are being overwhelmed by upscale restaurants, bars, hotels, and apartments in an echo of the transformation of New York’s Times Square in the 1990s. “When I started 30 years ago, there was a long run of peep shows,” says Paul Giorgio, who runs a fish-and-chips shop in the central London district. “Now people come in here and ask me, ‘Where’s Soho?’ If you take the sex industry away from here, you take away Soho. But I suppose they’ve got to if they want to make the money.”
Across the street from Windmill International, where more than 100 dancers strip nightly, the new Ham Yard Hotel serves the Fresh Fig Julep, a cocktail of bourbon, absinthe, mint, and homemade fig syrup, for £12 ($20). Walker’s Court, an alley once known for sex shops and adult movie theaters, is being converted into a high-end apartment complex. The cost of renting retail space in Soho rose 40 percent last year, to an average of £140 a square foot, according to broker CBRE Group. Office-building prices have almost tripled in the past five years, and office rents have doubled to £82.50 a square foot.
Soho is the latest sketchy area in London transformed by the boom. Kings Cross, where Google (GOOG) will build its U.K. headquarters, until recently was also a red-light district. Clapton, part of which was known as Murder Mile, is dotted with wine bars and a creperie. A two-bedroom flat in Brixton, the scene of race riots in the 1980s, can cost £550,000.
Leading Soho’s transformation is Soho Estates Holdings, a property development company created by Paul Raymond, the founder of the neighborhood’s first legal strip club. His collection of local property helped Raymond, who died in 2008 at the age of 82, amass a fortune that the Sunday Times estimated at £650 million. Nicknamed the King of Soho, he was portrayed by Steve Coogan in the 2013 movie The Look of Love. Raymond’s son-in-law, John James, is now the company’s managing director.
The Soho Society, a lobbying group, has said that development would damage the neighborhood’s “unique character.” James dismisses such sentiments. “The public backlash is ill-founded and based in nostalgic, romantic bollocks,” he says, adding that the proliferation of sex on television and the Internet has accelerated an industry decline that began in the 1980s.
Soho Estates’ holdings are now worth at least $800 million, according to James. The company, owned by Raymond family trusts, plans to spend £10 million to turn a bar, adult movie theater, and apartments previously used for trysts at Walker’s Court into a theater, restaurant, and homes that will start at £450 a week to lease. The Box, a burlesque nightclub, will remain. Russell Norman and Richard Beatty of the Polpo restaurant group, which runs eight restaurants around London, will open a restaurant at Walker’s Court. “It’s a wonderful location, part of real Soho: seedy, colorful, and hidden,” Norman said in an e-mail. Calling himself a fan of Soho’s “grit and grime,” he nevertheless said, “I really don’t get on with the crack peddlers on Rupert Street. And if a little gentrification can improve the area in this respect, then I support it.”
Although the sale and purchase of sexual services is legal in the U.K., brothels, soliciting, and advertising related to prostitution are not. On Dec. 20, police raided and shut down almost 20 brothels in Soho. “They bashed down doors, came in in full riot gear and with dogs, handcuffed women to the floor, were telling women they were going to tell family at home, pulled women wearing underwear outside in the street,” says Laura, a spokeswoman for the English Collective of Prostitutes, which campaigns for the abolition of prostitution laws. She declined to give her full name, citing organization policy.
Prostitution is big business in the U.K.—though not as big as property. Paid sex contributed about £5.3 billion to gross domestic product in 2009, the first time its value was estimated. Real estate transactions completed that year totaled £6.2 billion, according to data compiled by Investment Property Databank. For Soho Estates, the numbers point to the future. “I respect the 50 years of work Paul Raymond did, but that doesn’t reflect the next 50 years,” James says. “What I’ve got to do now is look at the property and say: Is there a better use for this?”