Great Portland Estates vows €920m London office push, despite loss

One of the UK’s best-known public property companies has outlined a £800 mln (€920 mln) cap ex expenditure programme to deliver 1.4 mln ft2 of new or refurb office space amid a supply drought.

Great Portland Estates announced the push while giving forecast-beating full year results in which CEO Toby Courtauld said he did not expect a recovery in London offices to be ‘uniform’.

During the year to 31 March, the company managed the largest pre-let at its 2 Aldermanbury Square development which law firm Clifford Chance will occupy.

Rental income grew across its portfolio by 6.5% and vacancy lowered to 2.5 against 10.8% in March 2022. However, it made an IFRS accounting loss of £163.9 mln against a profit of £167 mln last year.

Valuers have marked down its assets by 6.6% to £2.4bn – that is 7.3% down for offices including 5.1% down for its flexible office space business, and 4.5% down on its retail.

However, Courtauld’s message was upbeat. He said the company’s strong operating performance with record leasing and positive rental growth came during a year marked by elevated political and economic uncertainty.

‘Despite the impact of recent interest rate rises, London has continued to recover and is evidently busier than this time last year; centrally located offices are returning to more normal levels of occupation, and the West End is seeing higher numbers of both shoppers and tourists, supported by the opening of the Elizabeth Line.’

‘From here, whilst macro-economic challenges are likely to persist, we do not expect the recovery to be uniform. For some time, we have witnessed a growing divergence between the prospects of the best spaces versus the rest, and we believe this is set to widen further as customers seek out sustainable and well designed, prime spaces, of which there is a marked shortage, particularly in the West End. Consequently, we have increased our rental growth guidance for our prime offices to be between 3% to 6% for the year.’

It has 11 projects under way that aim to deliver 1.4 mln ft2 of space.

‘Our office-led capex programme extends to more than £800 mln of best-in-class sustainable spaces and we are targeting growth of our Flex space to more than one million square feet. So, with exceptionally strong finances and plentiful liquidity, we will continue capitalising on opportunities that are emerging, and with our experienced team, we can look to our future with confidence.'

Stockbroker Goodbody said the results showed it had beaten forecasts on NAV expectations. It said prime London assets continued to see rental growth as demand remained for the best buildings.



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