Rising interest rates and inflation sees decisions put back, developer says in half year results
British Land has said investors are holding off sinking money into London office schemes until the economic uncertainty calms down.
The firm behind the redevelopment of the Broadgate estate in the City of London as well as a huge mixed-use scheme at Canada Water said investors had put the brakes on decisions following September’s mini-budget and subsequent market turmoil.
In a statement accompanying its half year results to the end of September, the firm said: “After a strong start to 2022, investment markets were more subdued in the half with investors pausing to assess the impact of rising interest rates and inflation.
“Certain investors are actively looking to allocate capital to physical real estate but are likely to postpone making a decision until there is more clarity on the outlook.”
The firm is already on site with Sir Robert McAlpine’s £480m 2 Finsbury Square tower at Broadgate while it said it will submit plans later this month to turn 5 Kingdom Street at its Paddington Central development into a £400m, 127,000 sq ft underground urban logistics hub with a further 211,000 sq ft office space above it.
It added that it would finally submit plans to overhaul the 1960s Euston Tower next year which it said “will include a substantial amount of lab enabled space leveraging its location in London’s Knowledge Quarter”.
It said urban logistics was continuing to grow with vacant space in the sector at just 2.2% in London with only one available site of over 200,000 sq ft. “This reflects the strength of demand for very centrally located space driven by the growth of e-commerce and increased expectations for same day / next day delivery, requiring closer proximity to the customer,” it added.
The firm is looking at building a 637,400 sq ft two-storey logistics hub in Thurrock, on the eastern edge of London, as well as expanding existing sites in Wembley and Enfield, both within the boundary of the M25. It also has three sites in the middle of the capital including a former car park at Finsbury Square and a recently acquired plot in Southwark.
In its results, British Land said the value of its property portfolio fell 3% to £9.6bn in the six months to the end of September because of “a material deterioration in the economic environment”. The firm posted an after tax loss of £34m compared to a £370m profit last time.
Meanwhile, Great Portland Estates said that it has let a substantial part of its development at 2 Aldermanbury Square in the City of London to law firm Clifford Chance.
Building revealed two months ago Lendlease had been lined up for the job at City Place House on Basinghall Street close to London Wall. The 13-storey scheme, worth £180m, has been designed by Allies & Morrison.
GPE said this morning it has now inked the deal with Lendlease with the job set to finish at the end of 2025.
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