Great Portland Estates warns of potential rental hit from Covid-19 crisis

The chief executive of Great Portland Estates on Wednesday warned of coronavirus-induced difficulties ahead, but insisted London offices have a future despite some companies embracing the current working from home model.

Toby Courtauld gave a number of updates as his firm reported the value of its estate slipped 0.3% to £2.6 billion in the year to March, dragged lower by a fall in retail property values. He also cautioned on potential short-term rental falls in the future.

Since the year end the firm’s offices have remained open to occupiers, but many are significantly empty due to people working from home during the lockdown. Shops and restaurants are closed across the estate in line with government guidelines.

Courtauld said of the coronavirus crisis: “As we examine the implications for our business, it is clear that we must plan for a recession with an increase in unemployment, leading to reduced occupational demand for space, implying falling rental and capital values.”

However, the company said it is in a strong financial position and no GPE employees have been furloughed. There are no current plans to access any UK Government Covid-19 funding.

Courtauld said he believes firms will still want new London offices in the long-term, despite industry concerns occupier demand could suffer as people embrace working from home.

Courtauld said the company yesterday agreed a West End pre-let office deal for nearly 40,000 square feet of space with Exane BNP Paribas. It will be the headquarters for the Exane BNP Paribas Cash Equities business.

GPE's Courtauld said the deal at 1 Newman Street and 70/88 Oxford Street “is testament to the resilience of the central London office market and the quality of this scheme”.

That agreement, coupled with other lettings under offer, will generate £12.3 million of extra annual rental income for GPE.

Courtauld said there could be growing demand from employees for more flexible working, but companies are unlikely to shed any office space. He said firms could need all of their existing space, or more, to cope with any social distancing measures.

He added: “Whilst some working practices might change, our human desire to congregate and create underpins our belief that London's magnetic appeal as a global business capital will persist for the long term. This belief is reinforced by our current leasing discussions, illustrating occupiers' ongoing appetite to secure high quality, sustainable space.”

In another update today, GPE outlined a sustainability statement of intent. It has pledged to decarbonise the business by 2030.