The Qatari royal family’s property company has won approval to turn the US embassy in London into a luxury hotel.

Westminster council agreed Qatari Diar Real Estate’s plan for the Grade II-listed building in Grosvenor Square, Mayfair, on Tuesday. The nine floors, three of which are underground, will include up to 137 hotel rooms, shops, restaurants and bars.

The US state department agreed to sell the building to Qatari Diar in 2009 to fund a new embassy in the Nine Elms regeneration project south of the Thames. Estimates put the Grosvenor Square site’s value at £500m before it was made a listed building, which would have reduced the value because of restrictions on development.

Qatari Diar, part of the Qatari Investment Authority, has snapped up several high-profile London properties including the former Chelsea barracks, the former Olympic athletes’ village and most of Canary Wharf. Qatari investment interests also own Harrods and substantial stakes in Heathrow airport, Sainsbury’s, Barclays Bank and IAG, the parent company of British Airways.



The new US embassy being build at Nine Elms on the south side of the Thames. Photograph: Jason Hawkes/Barcroft Images

Grosvenor Square has housed the US embassy since 1938, and during the second world war the square was known as Little America because it was Gen Dwight D Eisenhower’s headquarters and other US operations were based there. The current embassy, topped by a gilded bald eagle with a wingspan of more than 11 metres, opened in 1960 and was designed by the Finnish-American modernist Eero Saarinen.

In March 1968, the embassy was the focal point for protest against the Vietnam war and was besieged by 10,000 demonstrators. After protesters broke through police lines, 200 were arrested and 50 people were treated in hospital.

The opening of the new US embassy near Battersea power station, in south London, has been delayed and will take place during the presidency of Donald Trump, not Barack Obama’s as planned. Work was meant to finish in late 2016 but it is now scheduled for completion in spring 2017.