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Great Portland Estates reports momentum in London office market

Great Portland Estates signed lettings worth £12.7m of new annual rents in three months to the end of June, with further £14.9m under offer, it said in a trading update.

The central London office developer’s chief executive Toby Courtauld said momentum was building. The new lettings, which included £8.0m of retail space, were 9.3% ahead of the March 2021 estimated rental values (ERVs).

Rent collection for the current quarter (which came due at the end of June) was at 84% (86% including amounts covered by rent deposits) – this was broken down by sector to 93% from office units; 58% from retail/hospitality/leisure sectors; 94% all other sectors. The collection rate was ahead of the previous quarter at the equivalent date.

The group’s development programme progressed during the quarter with one completion and the resolution to grant planning achieved for 320,500 sq ft prime office scheme at 2 Aldermanbury Square, in the City of London.

1 Newman Street, in the West End (122,700 sq ft) completed in July and is 38% let, while a major office refurbishment at 50 Finsbury Square, in the City (128,100 sq ft) is now all under offer, and the group forecasts a 21% profit on cost when completed in Q4 2022.

Leasing highlights included:

  • 16 new leases and renewals signed generating annual rent of £12.7 million (Great Portland share: £8.9 million), with market lettings 9.3% ahead of March 2021 ERV;
  • Three rent reviews were settled securing £2.0 million of annual rent (Great Portland share: £2.0 million) in line with the previous passing rent and 1.2% ahead of ERV;
  • Total space covered by new lettings, reviews and renewals was 213,000 sq ft;
  • The group’s rent roll has increased by 2.2% to £97.3 million and the group’s vacancy rate decreased to 11.8% (31 March 2021: 13.2%);
  • A further 23 leases under offer (196,400 sq ft) which would deliver approximately £14.9 million p.a. in rent (Great Portland share: £13.4 million), with market lettings 6.7% above March 2021 ERV; and
  • Around £33 million of new annual rent in negotiation, demonstrating continued demand for prime offices and best in class flexible spaces.

Financial position

The group’s loan to value (LTV) was relatively low at 19.1%. Consolidated net debt was £496.8 million, up from £477.5 million at 31 March 2021. The increase was largely due to on-going development capital expenditure across the group. Group gearing increased to 25.6% at 30 June 2021 from 24.6% at 31 March 2021.

The group had cash and undrawn committed credit facilities of £423.5 million. Weighted average interest rate was 2.5% at the quarter end and the weighted average drawn debt maturity was 7.8 years at 30 June 2021.

Toby Courtauld, chief executive, said:

“The acceleration in enquiries that we experienced in the first quarter of the year has translated into healthy leasing activity, particularly for our prime Grade A and flex office products. In a strong leasing quarter, we have continued to let space ahead of ERV, improved our rental collection performance and have placed 50 Finsbury Square, EC2, under offer to a single occupier. Furthermore, we have passed a significant milestone for our development pipeline by securing resolution to grant planning permission for the comprehensive redevelopment of 2 Aldermanbury Square, EC2.

“As momentum in our markets builds, we can expect demand for our flexible and sustainable spaces to grow. With our sizeable development programme designed to satisfy customers’ changing needs, our low leverage and high liquidity providing significant capacity for growth and our talented and innovative team, we are well placed to capitalise in such a dynamic market environment.”

GPOR : Great Portland Estates reports momentum in London office market

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