London is still a global draw despite Brexit, says British Land
Profits at UK’s second-biggest property company boosted by sale of ‘Cheesegrater’ skyscraper
London is still a big draw for global banks and institutions despite the uncertainty created by Brexit, according to one of the UK’s biggest property companies.
British Land said the process of leaving the EU was creating uncertainty, with tenants taking longer than usual to commit to office space, but there was still demand for good quality property in the capital.
“Looking forward, the picture is a mixed one. The Brexit process has begun but uncertainty will continue for some considerable time,” said Chris Grigg, chief executive of the company behind the “Cheesegrater” skyscraper in the City of London.
“London occupiers, particularly financial institutions, are making contingency plans but there is a wide range of possible outcomes here. Our conversations with occupiers tell us that a large majority continue to value London and believe in its place as a global centre, as we do.
“Although we are seeing businesses taking longer to commit and being more thorough in assessing options, we see polarisation of both occupier and investor demand accelerating with an increasing focus on the best quality space.”
However, a report from Deloitte suggests the prospects for property developers could worsen as there is a glut of office space in the capital. The amount of available office space jumped by 36% last year and has risen by a further 19% in the first three months of this year, according to the consultancy’s latest London crane survey.
As the amount of new office space completed in London hit a 13-year high of 3.9m sq ft in the last six months, construction work on new buildings slowed. The volume of office space under construction has fallen by 6% to 13.9m sq ft, the first drop in three years.
British Land owns property worth £13.9bn, with offices and residential in London, regional retail assets and a property development programme focused mainly in the capital.
Grigg said there was still a lot to attract occupiers to London, despite fears that Brexit will trigger an exodus among global institutions to rival cities within the EU, to guarantee continued access to the single market.
“We expect London to continue as a leading global city reflecting its diverse pool of intellectual capital and reputation for innovation, as well as its culture, language and strong regulatory and legal framework,” he said.
He was speaking as British Land announced its results for the year to the end of March. High-profile deals during the year included the sale of the company’s 50% stake in the Cheesegrater, officially known as the Leadenhall Building, to China’s CC Land for £1.15bn.
The value of its portfolio fell by 1.4% over the year, to £13.9bn, but it was up by 1.6% in the second half alone. Underlying profit rose by 7.4% to £390m.
“We are reporting a good set of results today despite an uncertain environment over the last 12 months,” Grigg said.
“We are particularly pleased by the increase in underlying profits, by our strong leasing performance across the business and by the very successful sales we have made. The increase in valuations in the second half is also better than many expected six months ago.”