West End is 'full', says London property giant Land Securities
Property giant Land Securities has declared its West End offices are “full” and in another sign that London is roaring back to business, latest industry data showed that firms are in talks to let even more space - enough to fill six Gherkin towers.
Landsec said today that its overall central London occupancy rate hit 96.5%. And the West End fared even better – with 99.6% of it let – meaning that the capital’s cultural heartland was “effectively full”, at least as far as the FTSE 100 group’s portfolio was concerned.
Mark Allan, CEO of the owner of the Lucent office development behind the iconic Piccadilly Lights advertising site, became the latest big name in the industry to point to the trend driving demand since Covid: “Customers concentrating on best-in-class space.”
He added: “In London, our well-located, sustainable offices in vibrant, amenity-rich areas continue to see growing occupancy, growing utilisation, growing customer space requirements and hence growing rents.”
But like its rivals, the company has not been immune from the rise of hybrid working and higher interest rates overall hitting property valuations.
The key industry measure for that – net tangible assets – fell nearly 5% to 893p per share, as higher interest rates hit investment demand and ate into the value of its portfolio.
That set Landsec up for a wider overall loss for the first half, of £193 million, 0.5% steeper year-on-year. It has also disposed of £1.4 billion’s worth of older-style “single-let HQ offices, mostly in the City, at prices ahead of today's values.”
It expects earnings for the full year to be “broadly stable” with the investment outlook becoming clearer with interest rates at their peak.
And the return to state-of-the art workplaces will help. The company said it recorded a “10% increase in office attendance” in the first half, compared with the preceding six months.
Landsec’s update came in the same week that its rival British Land reported forecast-beating profits helped by the “hotelification” of London office space helped British Land report forecast-beating profits.
Meanwhile, the latest research from real estate consultancy JLL said there was 3.4 million square feet of central London offices under offer as at the end of the third quarter.
The firm said that is 13% higher than the same period in 2022 and nearly a quarter above the 10-year average. To give an indication of the size of the space in negotiations, the Gherkin is 500,000 sq ft.JLL added that total demand is 11.5m sq ft – a 27% increase on the long-term average. Banking and finance have accounted for the largest amount of this, followed by professional services (26%).The research does not necessarily mean employers are upsizing, and there are firms that have said they plan to reduce workspace. But a number of landlords have observed a flight to quality for some employers, even if staff are only in offices a few days per week.
Chris Valentine, JLL's head of central London office agency said: "The market for best-in-class workspace remains resilient, as occupiers strive to obtain amenity-rich hubs in prime locations. This is particularly true for green buildings, as more and more occupiers sign up to net zero targets, coupled with the fact that these spaces can support a reduction of operating and energy costs."
He added: "We continue to see strong rental activity in this 'super-prime' category, with the best of the best commanding significant premiums."
