Further evidence emerged this week of the negative impact of the EU referendum on the London commercial development market as Great Portland Estates (GPE) followed Land Securities and British Land in announcing a loss.
Great Portland Estates reported a £62.7m pretax loss in the six months to September compared with a £371m pretax profit for the same period last year. The valuation of its portfolio dropped 3.7% to £3.8bn.
GPE also posted a 17% fall in revenue to £57.4m, down from £69.5m for the same period last year.
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Toby Courtauld, chief executive, said: “The referendum result has had a negative effect on business confidence in London which will likely result in lower economic growth.
“As a consequence, we can expect London’s commercial property markets to weaken during this period of uncertainty. However, the broad spread and depth of its economic activity and a growing population will, we believe, help to ensure that London maintains its position as a truly global city and Europe’s business capital.”
GPE said its current development programme consisted of five schemes with all but one in the West End and all due for completion in the next 15 months.
In addition, it has two uncommitted schemes in the West End and next to Crossrail stations, Oxford House and Hanover Square, totalling 311,800 sq ft that could begin in the next 18 months.
Earlier this week, both Land Securities and British Land said uncertainty caused by the decision to leave the EU in June had caused profits to fall into the red.
British Land, the UK’s second-largest real estate developer, today reported a pretax loss of £205m for the six months to the end of September, which it blamed on a fall in the value of commercial property in the wake of Brexit. And Land Securities said Brexit was to blame after it posted a £95m pretax loss in the six months to September from a pretax profit of £707.9m in the first half of last year.
“The UK’s decision to leave the EU marked the start of a prolonged period of uncertainty for the country, for our industry and for our occupiers,” said Chris Gregg, British Land’s chief executive, in a statement to the London Stock Exchange
In contrast there was good news for Argent as Google reaffirmed its decision to build its 10-storey HQ at King’s Cross.
Google’s new building is designed by Heatherwick Studio and Bjarke Ingels Group and replaces previous plans to be delivered by BAM Construction that were suddenly withdrawn in 2015 for being too boring.
The new 650,000 sq ft complex will make up more than half of the company’s complete King’s Cross campus. Contractors Lendlease, Mace, Multiplex and Sir Robert McAlpine have been shortlisted for the £1bn project.
The announcements were made as the latest Deloitte crane survey – which covers seven major office markets in the capital – said that the amount of office construction in central London has hit 14.8 million sq ft – the highest amount since 2008.
The survey, which runs for the six months to the end of September, said 40 new starts had been made during the period.
But refurbishment work accounted for 28 of these projects – almost three-quarters – with the survey reporting the amount of new construction activity is down 42% on the previous figure.
Chris Lewis, head of occupier advisory at Deloitte Real Estate, said: “Refurbishments… highlight the opportunity that developers can deliver into a market that still has low levels of available office space.”
The greatest number of new starts was in the City, where construction began on 14 new schemes, totalling 1.1 million sq ft, and increased the City’s development pipeline to 8.8 million sq ft.
But the West End and Midtown markets fared worse with a decrease in construction activity of 25% and 20% respectively over the past six months. This is largely as a result of a number of projects completing and smaller schemes starting, the survey added.
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