This new digest has been prepared on behalf of London Property Alliance by Concilio communications consultancy as part of a service agreement to provide information for our members.
City of London
Property Week reports that The Ministry of Justice has purchased an office block next to the Old Bailey courthouse for £111m to develop a new central London tribunal centre. Located next to the Old Bailey, the seven-storey building at 7 Newgate Street is already undergoing refurbishment and will house around 30 hearing rooms. The deal sees the government’s HM Courts & Tribunals Service (HMCTS) acquire the building from Quadoro Doric. A statement from the department said that the centre, which is expected to open by the end of next year, will comprise a flexibly designed space to accommodate different case types, with a variety of room sizes and layouts maximising the number that can be heard. The building’s fit-out is part of HMCTS’s £1.3bn investment to transform courts and tribunals. Justice minister James Cartlidge said: “The new Tribunal Centre will be developed into a modern space in the heart of London, with tribunal users at the forefront of its design. “We are investing significantly in court rooms and tribunal buildings across the country to meet the demands of our justice system.” Rupert Morgan, HMCTS property director, said: “I am delighted to confirm the purchase of 7 Newgate Street, securing tribunal hearing capability within the heart of London for years to come. “Optimising energy use and carbon emissions, the building will deliver the modern and efficient facilities which our users expect.”
City of London Corporation reports that 51 senior leaders from across the built environment have joined their Skills for a Sustainable Skyline Taskforce as Associate Members. Among the new Associate Members are representatives from the Department for Business, Energy and Industrial Strategy, the Greater London Authority, City & Guilds, Better Buildings Partnership, Keltbray, Lendlease, London First and Morgan Sindall. They will champion the taskforce and resource its working groups to drive change across the commercial construction sector. Chairman of the Skills for a Sustainable Skylines Taskforce and City of London Corporation Policy Chairman, Chris Hayward, said: “We are very fortunate to have the benefit of some exceptional industry leaders on our new Associate Membership. “With their expertise and willingness to deliver outputs at pace, we will see real change across our built environment in Central London as we move towards a net zero future. “Anyone working in this sector who shares our passion for securing skilled workers for sustainable commercial buildings should partner with us in sharing data and insights to drive this important agenda.”
City A.M. reports that The City should be a 24/7 destination outside of the Thursday evening drinks rush. Londoners will get their first chance to ride on the Elizabeth line as it finally opens in a major boost for the capital. Coming hot on the heels of the reopening of the Northern line’s Bank branch, the Elizabeth line will provide an economic shot in the arm – bringing an extra 1.5 million people to within a 45-minute commute of the Square Mile. A world-leading public transport system is critical to the capital’s post-pandemic recovery, which is why the City of London Corporation has invested heavily in this project. But we also need to make sure the Square Mile is a vibrant destination, so when people do get here – hopefully on the Elizabeth line – they have a reason to stay here, and want to come back. We must seize this once-in-a-generation opportunity by redefining our leisure offer to enhance the City’s vibrancy. This matters for small firms that depend on business, leisure and tourism footfall. It also impacts on our ability to attract top domestic and international talent, who rightly want to come to a City that offers unrivalled professional opportunities as well as a dynamic place in which to spend time.
Property Week reports that Burger restaurant Fat Hippo is set to make its London restaurant debut, with a new site at Shoreditch. The operator has signed a 15 year lease for 3,000 sq ft of ground-floor and basement space at Pennybank Chambers, 5-9 Great Eastern Street, EC2. Fat Hippo currently operates seven restaurants across the UK, including sites in Leeds, Newcastle and Cardiff. Niche property specialist Belcor has advised a private landlord in agreeing a deal with the independent burger chain. Stonebrook acted for Fat Hippo Restaurants.
Property Week reports that Clearbell UK Strategic Trust (CST) has announced that it is now fully invested, after 6-24 Britannia Street, Kings Cross, a commercial art gallery and office building, was acquired for £13.5m. The trust, which is advised by Clearbell Capital, has acquired 20 assets over 12 transactions since November 2020, totalling more than £150m. The mixed-use portfolio has assets in logistics, life sciences, offices, retail warehousing and leisure across the UK. The £13.5m acquisition, which is close to Kings Cross station and totals more than 17,000 sq ft, has been purchased from a private vendor, and was advised by Crossland Otter Hunt. Alice Murray, asset manager at Clearbell Capital LLP, said: “Over the last 18 months, our investment team has built a robust portfolio comprising assets in diverse sectors and locations across the UK. These assets have been acquired for the exciting, value-add opportunities we have identified, many of which we are already making headway on. The portfolio has performed well to date and we continue to work hard to implement further asset management initiatives to exploit opportunities and drive returns.
Kensington & Chelsea
Property Week reports that the government has agreed to the £4.25bn takeover of Chelsea FC after being satisfied proceeds of the sale would not benefit Roman Abramovich, the club’s Russian oligarch owner currently subject to sanctions. Nadine Dorries, the culture secretary, said the UK government issued a licence on Tuesday night allowing the sale of the club to a consortium led by LA Dodgers part-owner Todd Boehly. Under the terms of the agreement, £2.5bn will go into an escrow account until the government is satisfied the funds will go to a charity for victims of the war in Ukraine. The Boehly-led consortium has committed to invest a further £1.75bn in the club. Abramovich has agreed to conditions allowing his £1.6bn loan to Chelsea to go into a frozen account under government control. “Late last night the UK government reached a position where we could issue a licence that permits the sale of Chelsea Football Club,” a government statement said. “Following the sanctioning of Roman Abramovich, the government has worked hard to ensure Chelsea Football Club has been able to continue to play football. But we have always been clear that the long-term future of the club could only be secured under a new owner.”
Property Week reports that British Land has unveiled a masterplan for Canada Water in south-east London that could lead to the creation of 3,000 new net zero homes and around 2m sq ft of workspace. British Land has unveiled a masterplan for Canada Water in south-east London that could lead to the creation of 3,000 new net zero homes and around 2m sq ft of workspace. The 53-acre development would also include up to 1m sq ft of leisure, cultural and education facilities and add 12 acres of new parks, squares and green corridors. The plan is a joint venture between British Land and pension fund AustralianSuper. The first phase of the masterplan is already under construction and is expected to be complete in Q3 2024. Emma Cariaga, joint head of Canada Water at British Land, said: “We have an incredible opportunity at Canada Water. The chance to reimagine an entire town centre – in the heart of London, surrounded by parks and waterways – comes once in a lifetime. “A truly unique place, Canada Water is central, but has a local, leafy feel. It is the sort of place where you’ll know your neighbours and feel part of a real community, where businesses can grow and where people will put down roots. A diverse area that is already home to people from all walks of life, the development will not only preserve but enhance all of the local history, character and biodiversity that’s already here.”
City A.M. reports that the Elizabeth line will be a “game changer” for the evolution of Canary Wharf from mere financial centre to a place where people can live, shop and enjoy themselves. According to Shobi Khan – chief executive of real estate giant Canary Wharf Group – since yesterday’s opening of the Elizabeth Line, passenger numbers at the new Canary Wharf station have gone through the roof. “We had north of a 40 per cent increase [in passenger numbers] from a typical Tuesday,” he told City A.M. “We have had a lot of new people, not only the commuters, but we also had a lot of new people coming to the Estate.” Even though works at the 128-acre Estate were completed in 2015 with the addition of new shops and restaurants, Crossrail’s opening is set to turn Canary Wharf into its best version yet, “Canary Wharf 3.0.” The tube line will better connect Canary Wharf to central and east London as well as to Heathrow airport, as services to Liverpool Street will take 6 minutes, while rides to Paddington and Heathrow will take 17 and 39 minutes respectively. By attracting an additional 1.5 million visitors, the Elizabeth line will help people become “aware of what’s going on here.” “You want residential, it’s all here; you want schools, it’s all here; you want great amenities, it’s all here; you want to be in a sustainable environment, it’s all here,” Khan explained.
Property Week reports that Kennedy Wilson has secured a 10-year lease on 31,000 sq ft at 111 Buckingham Palace Road, in the Victoria submarket of London. The new lease with Epic Games brings its total lease agreements in the office building to 72,000 sq ft. The lease to Epic follows recent new lease agreements with Verisure Services, Superbet and Hambro Perks, taking the building’s occupancy from 79% at the end of 2021 to 100%. Kennedy Wilson has refurbished the scheme, with a focus on enhancing both operational energy efficiency and wellness facilities for occupiers. Mike Pegler, head of UK at Kennedy Wilson, said: “Epic Games’ lease agreements at Buckingham Palace Road along with almost 40,000 sq ft of additional recent lettings brings this prime office building to full occupancy with a strong line-up of tenants. “These leases demonstrate continued strong demand for high-quality, well-located, Grade-A office space of scale offering sustainability features with communal, collaborative and wellbeing benefits to occupiers.”
Property Week reports that Shaftesbury’s West End portfolio has “continued bouncing back” in the first half of the fiscal year after overturning a £338m loss last year to post post-tax profit of £247.6m. The REIT said its portfolio valuation had leapt up by 7.5% in its half year 2022 results, boosted largely by rising rents, and also reported a 55% income rise to £41m in the six months to end of March over same period last year. But the company stayed quiet on a potential merger with fellow property giant Capco, stating it was still in “advanced ongoing discussions”. Brian Bickell, Shaftesbury chief executive, told Property Week: “We said last November that the West End was bouncing back, and the bounce has continued all the way through the last six months. “As Covid has receded, people have been catching up doing the things they hadn’t done before. So life is returning to normal, footfall has risen strongly and there’s a very promising trajectory there. Similarly, in the occupier market, I think occupiers are seeing the resilience of the West End. “We have a lot of headwinds ahead of us so we’re happy to have momentum in place. We’re in good place for whatever may lie ahead.”
Property Week reports that Luxury French brand Christian Louboutin and financial consultant Smith Square Partners have signed up as new tenants at M&G’s Byron House in St James’s, central London, Property Week can reveal. The companies have each agreed to take one floor, around 4,300 sq ft, on a five-year term at £90/sq ft. Christian Louboutin, which was advised by HDH, will take the fourth floor, while Smith Square Partners will take the third floor. The 12,534 sq ft property is at 7-9 St James’s Street, on the east side of the street, offering access to Green Park, Piccadilly and Charing Cross transport hubs. Landlord M&G Real Estate spent a reported £1.2m to refurbish the available office space – on the third, fourth and fifth floors – as well as to modernise the reception area. M&G was advised by JLL and Hanover Green. This follows new data from Cushman & Wakefield revealing rents in both Shoreditch and Clerkenwell have shot up by 123% since Crossrail proposals were first given Royal Assent in 2008, while rents in Paddington have grown by 45%. Comparatively, rents in the City have risen by 21% and in the West End core by just 2% – areas that have traditionally been London’s strongest-performing markets.
The Daily Mail reports the mission to save Oxford Street’s M&S: Grand Designs’ Kevin McCloud and comedian Griff Rhys Jones join leading figures demanding Michael Gove spares 100-year-old store from the bulldozers. Grand Designs presenter Kevin McCloud and comedian Griff Rhys Jones have joined leading figures in calling for a public inquiry into proposals to demolish Marks and Spencer’s largest and most prestigious store on London’s Oxford Street. The high-profile public figures are among 27 people from the worlds of heritage, architecture and sustainability who have signed an open letter to Communities Secretary Michael Gove. In the two-page letter, which has been organised by campaigning group Save Britain’s Heritage, they call for Mr Gove to launch a probe into plans that they claim would ‘pump nearly 40,000 tonnes of C02 into the atmosphere’.
UKReiff reports that Helical plc, a UK real estate investment trust (REIT) specialising in the redevelopment and refurbishment of highly sustainable, best-in-class London office buildings together with its joint venture partner Baupost Group, has exchanged contracts to sell 55 Bartholomew Close to a private European investor for £16.5m. The sale price reflects a net initial yield of 4.5% and represents a premium to book value, net of rental top ups. Originally three Victorian townhouses, the building was comprehensively refurbished to provide 10,976 sq ft of office space, over ground and five upper floors. It is let to five office tenants at an average rent of £72.17 psf, and currently has one vacant floor. Delivering BREEAM Excellent, bike storage and shower facilities, the property offers contemporary office space with finishes that complement the heritage of the building. Tom Anderson, Senior Investment Executive of Helical, commented: “This sale reinforces the attraction of good quality London real estate for international capital as well as demonstrating our ability to reposition and repurpose assets to deliver best in class buildings. The proceeds will be recycled into new value add opportunities where we can provide high quality sustainable buildings that meet the occupational markets demands.”
Property Week reports that just over 86% of new construction schemes on London offices launched in the last six months were refurbishment projects, according to Deloitte’s latest London Office Crane survey. In the six months to the end of March, 36 new schemes commenced, 31 of which consisted of “comprehensive refurbishments” covering ESG upgrades and changes to reflect occupier demand, the company said. “Increased new starts – especially of refurbishments – reflects anticipated renewal of existing stock to provide sustainable and quality space now strongly demanded by occupiers,” said Mike Cracknell, Deloitte’s head of real estate. Philip Parnell, real estate valuation and ESG lead at Deloitte, added: “The ESG agenda is far from new but increasing levels of corporate reporting transparency, stakeholder pressure – including that from occupiers – and more stringent environmental standards are undoubtedly driving investor and developer focus. “We can expect to see continued growth in refurbishment activity to address value erosion caused by accelerating obsolescence and occupier choice.” Pre-letting activity in the capital remains broadly similar to previous surveys, with almost a third of space under construction being committed to by a tenant. Around two-thirds (65%) of developers surveyed report that demand was “a little better” and 14% say it is “much better” than six months earlier.
Estates Gazette reports that from the moment Crossrail was approved in 2007 by then-prime minister Gordon Brown, it became a tag with which to market the areas around its most significant central stations, and that has intensified with each year. Office rents in Farringdon, for example, have grown by 7.9% in the past five years against a London average of 2.9%, according to Savills research. New buildings have sprung up around those stations too, dramatically changing the skyline. In Farringdon, these include Helical’s 88,600 sq ft Kaleidoscope building and HB Reavis’ 145,000 sq ft Bloom, where Wild spoke in October. Elsewhere, Sellar’s major new 350,000 sq ft office scheme Paddington Square has transformed the landscape next to the west London station. Bond Street, too, has seen GPE’s 221,000 sq ft Hanover Square scheme go up around its new station, and Tottenham Court Road has Derwent’s 285,000 sq ft Soho Place. It is what Alexander Jan, chief economist at the London Property Alliance, calls the “announcement effect”.
Property Week reports that London submarkets benefiting from Crossrail’s connectivity are set to see office rents continue to soar, outperforming traditional hubs such as the West End and the City, according to London office experts. Cushman & Wakefield’s head of London offices Ben Cullen has predicted that Shoreditch and Clerkenwell rents will continue to soar now that the line is officially open, as “people and businesses realise how game-changing the Elizabeth line is”. He told Property Week: “If you look at the Jubilee line, rental growth was greater post-opening than it was pre-opening, so rents aren’t just going to sit where they are. “The fundamental thing here is talent, and that is being driven by the east-to-west catchment of the Elizabeth line. So it starts to make those really strong locations with really great transport infrastructure increasingly attractive destinations.”
City A.M. reports that London is back on the global property radar as foreign home buyers shrug off Brexit and stamp duty changes. International buyers are returning to the London property market after three consecutive years of declining market activity, brought about by Brexit, changes to stamp duty and, of course, the pandemic. Since last year, international interest has started to return to the capital, with transactions climbing by 0.6 per cent.At the same time, the market value of these purchases has also increased, up 4.8 per cent to nearly £11.4bn. In 2017, international buyers showed phenomenal interest in London property, accounting for 31,693 property purchases. At £15.2bn, the market value of these property purchases was also the highest seen in a single year in the last decade and was 24.3 per cent higher than the previous year. Not only was this the highest total in the last decade, but it also marked a 21 per cent annual increase in market activity, Geoff Garrett, the director of debt advisory firm Henry Dannell, shared with City A.M. today. His firm analysed the level of London property sales attributed to foreign buyers and how this has changed over the last 10 years.
City A.M. reports that property investment firm Grosvenor is back in the black after better fortunes for its 300-acre estate in Mayfair and Belgravia. Owned by the Duke of Westminster, the multibillion-pound portfolio swung back into profit with a pre-tax profit of £327.5m, after posting a £322.8m loss in 2020. The Liverpool ONE shopping centre owner swung back into the black after the value of its properties were marked back up, following post-lockdown optimism. Grosvenor’s portfolio is worth £8.9bn, after its property value increased by £320m last year. It comes as footfall in the West End has rebounded after being hammered hard during the pandemic, when both domestic and international visitors shied away from the capital’s shopping and theatre destination. However, while UK and European urban property performance “recovered with improved rent collections,” chief executive Mark Preston admitted that “valuations remained subdued as central London grappled with the impacts of Covid.” Property income hit £310.2m in 2021, an increase of almost a quarter on the year prior’s sum of £254.6m. Rent collection had gathered pace once more. Some 93 per cent of rents due from tenants in 2021 were paid by January, compared with 89 per cent of 2020 rents. “Despite ongoing restrictions and lockdowns remaining a feature across our markets, decisive action in response, coupled with an improving economic environment, helped us achieve a significantly improved financial performance compared to the previous year,” Mark Preston, chief executive of Grosvenor, said.
City A.M. reports that landlords are being pushed to innovate by ‘Instagrammable’ build-to-rent schemes with furnishing and socialising space. Landlords are being pushed in to more innovation and providing better furnished homes because of modern renters. Younger people are looking for professionally managed properties to live in, as part of a build-to-rent (BTR) schemes, which are created specifically for the purpose of renting. The majority of people renting are still doing so through landlords (82 per cent), but are increasingly looking for in-built kitchens and furnishing. Almost 70 per cent want outdoor space, according to research published by Hatch interiors, with figures outlining that 40 per cent of the 1,000 people surveyed want to live in build-to-rent facilities. This is driven by a desire for wellness facilities like a gym and more than a third looking for socialising space. Jodie Wardell, Head of BTR at Hatch Interiors, said landlords can only compete with the changing market by “making rental properties as welcoming and inviting and importantly, Instagrammable as possible.”
Aliance news reports that Great Portland Estates PLC on Thursday said it swung to an annual profit as it registered a rise in portfolio value and a record year for leasing. The London-based property developer and investor swung to a pretax profit of GBP166.7 million in the year ended March 31, from a loss of GBP202.0 million the previous year. Its portfolio value rose 6.1% against the previous year, which was “well ahead” of its central London benchmarks, the company explained. Its office valuation was up 7.9% against the year prior but its development properties soared 49%. The total property return for the year was 9.4%, compared to the central London MSCI annual index’s figure of 7.0%. This outperformance was driven by its recently completed development schemes and its record leasing year. Great Portland Estates signed GBP38.5 million leases in the year, a record figure. It added that it started the new financial year with GBP2.9 million lettings, GBP9.4 million lettings under offer and a further GBP32 million under negotiation. Despite this, revenue dipped 4.9% to GBP84.2 million from GBP88.5 million. The company explained that this was due to lower gross rental income and reduced service charge income. These figures fell 10% and 14% respectively year-on-year.
The Guardian reports that Landsec has reported record office leasing in London as the lifting of Covid restrictions fuels a return of workers and a surge in demand for prime space, as the property company bounced back to profit last year. Landsec is one of Britain’s biggest property firms and about 60% of its portfolio is in central London. It reported a pre-tax profit of £875m in the year to the end of March. The company, which owns offices such as Deutsche Bank’s London headquarters and an office complex near St Paul’s Cathedral, reported a loss of £1.4bn the previous year as the coronavirus pandemic shut down offices across the UK. “Reports of the demise of office working may have been premature, judging by a return to profit for Land Securities,” said Russ Mould, the investment director at AJ Bell. “Astonishingly in central London the company is seeing record leasing levels. In a competitive jobs market where employers probably want their staff in the office at least some of the time, attractive locations with flexible space are a must.”
Sharecast reports that Capital & Regional reported a strong ongoing recovery in an update on Thursday, saying that in the first four months of 2022, footfall was 193.3% of the same period last year. The London-listed retail property investor said in total there were 18.4 million shopper visits, equating to about 76% of the footfall for the equivalent pre-pandemic period in 2019. In the year to date, it said it had completed 34 new lettings and renewals for a combined value of £1.8m, ahead of previous rent and estimated rental value. At Ilford, the company recently signed a lease agreement with the NHS for a new community healthcare centre on a 25-year lease term. Capital & Regional said it would be a “flagship project”, providing a new 20,000 square foot purpose-built facility that was expected to open in 2024. Also at Ilford, it had agreed to relocate and upsize TK Maxx into a new 35,000 square foot store occupying the first floor of what was Debenhams. The board said that would enable remerchandising of the existing TK Maxx unit, which sits at the entrance next to Ilford station, set to benefit from the impending opening of the Elizabeth line.