Net Effective Rents for Prime London Offices Approach Pre-pandemic Levels

A fall in rent free periods being offered across the London office market have led to net effective rents rising faster than headline rents.  Net effective rents for prime space continued to rise in Q1 2023 and are at around 0.5% of their pre-pandemic levels.  Headline rents, across London’s sub markets, however, have been somewhat static, despite an ongoing lack of supply. Some districts have seen an increase, most notably core City of London (3.4%) and Soho (2.7%), but overall growth in prime central London headline rents sat at a modest 0.4% during this quarter. Over the past 12 months to Q1 2023, prime headline rents across central London increased by an average of 2.6%. Across the four key submarkets, the strongest rental growth was in the City at 3.6%, followed by the West End at 3.4%. Docklands saw growth of 1.85% over the year, while Midtown increased by 0.8%. Looking at the net effective rent based on [...]

Net Effective Rents for Prime London Offices Approach Pre-pandemic Levels2023-05-09T14:45:52+00:00

WeWork Shares Continue to Slide

WeWork Inc stated last week that it had received a non-compliance notice from the New York Stock Exchange, due to its stock closing below $1 over a consecutive 30 trading-day period. Shares of the flexible workspace provider continue to slide.  The company will have six months to regain compliance.  The company had benefited from the shift to flexible working practices outside traditional offices driven by the pandemic but has been feeling a pinch from mass layoffs across the tech sector and shares have fallen over 65% year to date.  Since their surging growth through the 2010s WeWork has been trying to focus on more profitable leasing deals in recent years. WeWork says it is considering a number of available alternatives to cure its non-compliance. Currently, however, WeWork’s penny stock status precludes a range of possible investors as their value is too low to meet their investment parameters.

WeWork Shares Continue to Slide2023-04-27T10:49:32+00:00

Green Light for £50m Central London Offices Refurb

Planning permission has been granted at 21 Bloomsbury Street for the refurbishment of these 86,000 sq ft Central London offices.  The refurb is to be undertaken by Morgan Capital on behalf of Capital 38 who acquired the building in 2012 for an undisclosed sum and will give the building a gross development value of circa £150m. Work is due to start in the third quarter this year and will see an atrium café/lounge, rooftop café/event space, building wellness studio, 174 cycle spaces, 112 lockers and 17 showers and a feature cycle entrance. Simon Morgan, investment and asset manager of Morgan Capital, said  “Twenty One will set a new benchmark for how existing buildings can be sustainably reimagined to provide the exemplar buildings of tomorrow, providing the performance and amenity to compete with the very best new builds, whilst achieving aspirational levels of low embodied carbon through 95% retention of the existing structure.”

Green Light for £50m Central London Offices Refurb2023-04-12T13:28:39+00:00

Central London Office Investment Bounce Back

Central London investment has rebounded in the first quarter of 2023 following the lowest levels of investment on record. This signals the start of a recovery in volumes and is thanks to an influx of Asian money. The £1.65bn investment in central London offices in Q1 was more than double that of Q4 2022 heavily led by Asian capital, making up 74% of all purchasing activity in Q1 2023. Major deals included Malaysian firm Gamuda’s £257m purchase of Winchester House; the £395m acquisition of St Katherine Docks by CDL; GIC’s £1bn joint venture at Tribeca in King’s Cross; and Japanese firm Obayashi’s purchase of 60 Gracechurch Street for around £160m. Ed Bradley, CBRE’s head of London capital markets, said that “following a sharp repricing of office values in Q4 2022, we are once again seeing significant interest from Asian investors, both established groups as well as new entrants. “We expect Asian investors to lead the rebound in investment [...]

Central London Office Investment Bounce Back2023-04-03T18:07:00+00:00

Q2 Office Sales Value Downturn

The office market is forecast to see a fall in sales values over the next quarter whilst rents are expected to see some growth in comparison to the first quarter.  This can be seen as purely a product of the cyclical nature of property and it reacting to other markets; although other headlines may seem more alarming The Guardian has asked could offices be the next big casualty of the banking crisis which on the surface of it may cause worry. At the same time as the Evening Standard tells us of the property market “London copes better than rivals with less vacant office space recorded “ The banking crisis comprises the failing of Silicon Valley Bank and the rescue of Credit Suisse, who had been in trouble for years - so not really a crisis as of yet. Accepted neither of these is great news but whether they a creating the perfect storm for the property industry [...]

Q2 Office Sales Value Downturn2023-03-29T14:43:35+00:00

Capco and Shaftesbury complete £3.5bn merger

Capital & Counties and Shaftesbury have completed their £3.5bn all-share merger to form Shaftesbury Capital. This new company will dominate the Soho and Covent Garden areas of central London.  Shaftesbury Capital’s portfolio is focused on Covent Garden, Seven Dials, the Opera Quarter, Carnaby Street, Soho, and Chinatown. The portfolio has been independently valued at £4.9bn Ian Hawksworth, chief executive of the merged group, said: “Today we are delighted to complete the merger, bringing together two highly complementary portfolios to create the leading central London mixed-use REIT, Shaftesbury Capital. We look ahead with confidence, with an experienced and talented team, to deliver long-term economic and social value for stakeholders and contribute to the success of the West End.” Shaftesbury Capital’s assets offer 1.7m sq ft of hospitality, leisure and retail space, around 600,000 sq ft of office space and more than 800 apartments. The annual gross income of the merged group is £178m, while the portfolio’s estimated rental value is £227m [...]

Capco and Shaftesbury complete £3.5bn merger2023-03-21T15:56:25+00:00

Landsec Secures Consent for Southwark Offices

Landsec has gained consent for the redevelopment of Red Lion Court, Bankside, part of a one million square foot development programme focused on building a green office cluster in London's Southwark. Red Lion Court will comprise 230,000 sq ft of offices, retail & open public space on the banks of the River Thames, next to Borough Yards.  The scheme, designed by the Bjarke Ingels Group, offers floorplates from 18,000 to 26,600 square feet all with access to outdoor spaces, a communal roof terrace and views over the river into the City The building has been designed to be net-zero in construction and operation and by reusing part of the existing building and prioritising low carbon and recycled materials should meet or exceed the Greater London Authority and Southwark borough policy in terms of sustainability, biodiversity and energy efficiency. The building will also be fully electric and feature a sustainable urban drainage system which repurposes rainwater for future use. [...]

Landsec Secures Consent for Southwark Offices2023-03-10T13:07:08+00:00

TfL picks Helical for Central London Offices Developments

Transport for London has chosen listed London developer Helical as its preferred investment partner for its commercial office portfolio across central London. The decision is subject to contract negotiations and a 10-day standstill – or cooling off – period. The partnership will develop "high-quality and sustainable" office space above or close to Tube stations at Bank, Paddington and Southwark with all three sites have full planning permission. Bank: above the new station entrance on Cannon Street, this eight-storey development, along with a basement, will include both office and retail space, measuring around 140,000 square feet net internal area external terraces on fifth, sixth and seventh floors and a green roof. A start on site is envisaged next year.       Paddington: located by Grand Union Canal and close to the new Elizabeth line station at Paddington, this 19-storey building currently has permission for new office and retail space at around 235,000 square feet NIA. It will include [...]

TfL picks Helical for Central London Offices Developments2023-03-07T10:38:05+00:00

Segro Swings to £2 Billion Loss in 2022 Due to Valuation Write-Downs

Logistics Developer and Investor Sees no End to Strong Rental Growth Segro reported a £2 billion pre-tax loss for 2022 compared with a £4.4 billion profit in 2021 under International Financial Reporting Standards accounting rules, due to unrealised valuation losses in its portfolio. The value of its portfolio fell 11% to £17.9 billion last year. The net yield moved out 100 basis points to 4.8% from 3.8%. Adjusted pre-tax profits came in at £386 million last year compared with £356 million in 2021. Strong rental growth cushioned the blow somewhat. Segro sees no end to rental growth. Net rental income rose 18.9% to £522 million from £439 million in 2021. On a like-for-like basis, rental growth rose 6.7% thanks to strong occupier demand and “extremely limited” supply of modern, sustainable warehouse space across Europe. Segro expects vacancy levels to remain low given increases in financing and construction costs. The company said it sees £130 million of reversionary potential [...]

Segro Swings to £2 Billion Loss in 2022 Due to Valuation Write-Downs2023-02-23T11:43:36+00:00

Russia’s invasion of Ukraine marked ‘new era for real estate’

Russia’s invasion of Ukraine signalled a new era for commercial real estate, as the end of the low interest rate environment means investors no longer treat commercial real estate as a bond proxy, according to MSCI. Chart shows basis-point spread and office yields to 10-year government bonds Source: RCA Hedonic Series office yields MSCI’s report, Global Markets One Year After Russia’s Invasion of Ukraine, noted that the Ukraine war coincided with the end of the post-2008 global financial crisis boom brought about by the low-rate, low-return environment that pushed trillions of dollars into global real estate, depressing yields and driving prices up to record levels. “Russia’s invasion now appears to have signalled the end of that expansion and the start of a transition to a new world of higher rates and higher returns,” explained Tom Leahy, MSCI’s head of EMEA real assets research. According to Leahy, the rapid rise in swap rates meant debt costs surged above property [...]

Russia’s invasion of Ukraine marked ‘new era for real estate’2023-02-23T11:40:55+00:00
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