(Bloomberg) -- The BT Tower, one of London’s most distinctive buildings, is set to become a hotel after BT Group Plc agreed to sell the site to MCR Hotels for £275 million ($347 million).

The tower used to provide a number of network operations and antennas for connectivity, but the technology isn’t needed any longer. The sale is part of BT’s plan to cut costs and real estate holdings, the company said in a statement on Wednesday. 

The London tower dates from 1964 and is 177 meters (581 feet) high, and was the tallest building in London until 1980. The top floor was used as a revolving restaurant until 1971, and BT has used the floor as a venue for corporate and charity events since 1984. 

MCR Hotels, the third largest hotel owner-operator in the US, runs some of New York’s best-known hotels, including The High Line Hotel and the TWA Hotel at JFK Airport. The firm plans to repurpose the Grade II listed BT Tower as a hotel through a partnership with London-based Heatherwick Studio, whose design credits include the updated Routemaster bus, the 2012 Olympic Cauldron and the Vessel sculpture in New York’s Hudson Yards. 

BT will take a number of years to vacate the premises, according to a statement from MCR Hotels, due to the complexity of the work. That will allow time for design development and engagement with local communities, MCR said.

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The deal comes amid a grim picture for commercial property worldwide. The MSCI World Real Estate Index fell by 18% between the start of 2022 and the end of 2023, following a surge in interest rates and a rise of home working that sapped demand for big, centralized workspaces.

London initially lagged the rest of the UK in the post-pandemic hotel recovery, fueled by a “staycation” boom and international travel restrictions. Since then the situation has improved, with an increase in vacations boosting the average daily rates in the city’s hotels by 19% in the first five months of 2023, according to a report from broker Savills Plc.

With global air passenger demand forecast to rise by almost a fifth next year compared to 2019 levels, some of the world’s biggest hotel operators are betting that demand will improve further. Savills expects average daily rates at London hotels to continue growing, but has warned a correction back to pre-pandemic levels looks highly unlikely. 

(Updates with background on commercial real estate from sixth paragraph.)

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