London landlord Great Portland Estates to invest £900m in flexible office space

·3 min read
GPE's annual net rental income fell to £62.1m from £79.9m a year earlier. Photo: View Pictures/Ed Reeve/Universal Images Group via Getty Images
GPE's annual net rental income fell to £62.1m from £79.9m a year earlier. Photo: View Pictures/Ed Reeve/Universal Images Group via Getty Images

London developer Great Portland Estates (GPOR.L) will invest £900m ($1.2bn) in flexible office space as lockdown restrictions ease and people begin returning to the office. However, the company swung to a loss for the year to 31 March.

Shares in the company ticked up roughly 2% on Wednesday morning.

CEO Toby Courtauld said: “We are encouraged by the recent acceleration in enquiries we are receiving from prospective occupiers, particularly for our prime Grade A and flex office products.

“With limited supply across central London over the next few years, we can expect innovative, flexible and well serviced space with strong wellbeing and sustainability credentials to command an increasing premium to poorer space,” he added.

GPE's stock rose on Wednesday morning. Chart: Yahoo Finance UK
GPE's stock rose on Wednesday morning. Chart: Yahoo Finance UK

For this reason, the company expects to grow its flex office offer and commit roughly £900m of capital expenditure to deliver net zero carbon spaces designed “to satisfy the changing needs of tomorrow's occupier.”

Flex space now makes up about 13% of its office portfolio. Flex space is any building that has a combination of warehouse space and office or retail space.

GPE's loss after tax for the year to 31 March came in at £201.9m, down from a profit of £51.8m a year earlier. Annual net rental income fell to £62.1m from £79.9m a year earlier.

GPE’s portfolio valuation for its 2021 financial year was £2.5bn, down 8.7%.year-on-year as a result of retail value declines. The value of the its shops fell by more than a quarter over the year and rents dropped 17%.

Offices performed somewhat better, losing 1.7% of their value over the year.

"Over the last year we have been operating in some of the most challenging trading conditions we have experienced," said Courtauld.

Read more: Market inflation fears stoked as UK prices jump 1.5%

"Our markets in central London have been in lockdown for much of the time, affecting all aspects of life and impacting our operations. Despite this context, GPE remains in robust health with a strong balance sheet given our low leverage and high liquidity, allowing us the capacity for significant investment to drive growth," he added.

He also said he believed the "full buzz of London" will return in time.

Last week, GPE, which owns 2.6 million square feet of central London property, completed the office leasing of 18 Hanover Square to an undisclosed financial services company.

The property is a new nine storey building incorporating the eastern entrance to the Elizabeth Line’s Bond Street station.

Earlier in the week, GPE rival Land Securities (LAND.L) said its full-year loss widened by more than £500m as its rental income took a hit amid the pandemic, which hit its retail and leisure assets hard.

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