At a challenging time for the offices market, Trammell Crow Company’s acquisition of London-based office developer Candour will likely turn heads.
For Candour founders Toby Pentecost and Dan Rees, who are set to join the CBRE-owned, US-based development subsidiary as senior vice-presidents and co-heads of UK offices, the acquisition is timed to take advantage of a “huge mispricing” and overselling of offices in Europe.
Pentecost told EG that, in terms of development land values, now is “as good a buying opportunity as the years immediately after the global financial crisis”. “The big buying opportunities for committed capital and expert development are very strong,” he said.
Since Candour’s launch in 2019, Pentecost pointed to a “strong market throughout” for high-quality offices. “Obviously, this is getting beaten up at the moment, but we have seen really strong demand for high-quality, ESG-led, amenity-led office schemes,” he added.
At a time when buyer and balance sheet availability is paramount, Pentecost said the acquisition would put the business in a “really strong position” for “very exciting, once-in-a-cycle opportunities” in the coming months and years.
Rees said a sale of the business might seem early to industry observers, but marked “a big milestone”. “It allows us to access opportunities and deals that we might otherwise have had to forgo,” he said.
When EG spoke with the duo, Rees had just finished touring a 20-acre site in Oxford that it “would not have bothered” considering before the acquisition. “It’s opening our eyes – the deal flow, the capital partners,” he said. “It’s fuel on the fire. We loved what we had – it was bloody good – and by coming together with TCC, we’ll accelerate at a quicker rate.”
Pentecost said: “In respect of European offices, this company is a sleeping giant. If you’ve seen its work in the US, you’ll see that it tends to do things in a big way. We felt immediately an element of chemistry around our product fit, the markets that we wanted to be in.”
After Pentecost and Rees were introduced to TCC at the beginning of this year, the opportunity to replicate its US model in Europe became apparent. Pentecost underlined similarities between developers, namely in terms of working with capital partners and in joint ventures.
“When we analyse their existing capital partners, we saw a serious, consistent track record for repeat customers,” said Pentecost. “A lot of the capital partners that work with Trammell Crow Company keep reinvesting in new deals, and that gave us a great deal of confidence about the quality of opportunity and business.”
Turbo-charging the pipeline
Pentecost said the advantage of the acquisition was twofold. Being able to access TCC’s balance sheet capital will position the business as a “huge differentiator” in the market; moreover, it ensures the backing of what is “arguably the biggest brand in our sector”.
“It would be hard to find someone who hadn’t heard previously of CBRE,” said Pentecost. “The degree to which TCC is ingrained in the real estate market globally is so exciting for us – it needs no introduction.”
TCC will complete some 840,000 sq ft of grade-A commercial projects in Candour’s development pipeline. Those include the Welcome Building in Bristol and 39 Deansgate in Manchester, as well as the strategic repositioning of two London office assets. The Welcome Building, which is among Bristol’s biggest developments, will be net zero in operation and is set for practical completion in Q1 next year. The developments will be added to the US firm’s existing $15.4bn (£12.7bn) projects in process and $14.5bn pipeline.
Under the new umbrella, the office developer wants to do joint ventures and fee development. Rees also pointed to scope to unlock public-private partnerships.
For Rees, the business will have a greater ability to prise out “great assets, great bits of land and great buildings from otherwise reluctant sellers”.
“When we set the business up, we set it up to do few assets of scale, and this is basically taking that to another level,” said Rees. “We won’t be buying [through] a deal a month, it might be a deal a year, but it will have the scale and it will be in very select geographies. We will be laser-focused.”
While the business plan will prioritise Candour’s existing partners and projects, Rees and Pentecost said London and key European cities are among the targets as far as markets for expansion are concerned. In the UK, geographies of interest include London, Bristol, Manchester, Edinburgh and Glasgow. Oxford and Cambridge are also on the wishlist, on the back of each city’s higher education offers and talent pools.
Beds, sheds and offices know-how
The duo, along with development director Andrew Clarke, will join Trammell Crow Company’s base at 35 Portman Square, W1, before the end of November.
Pentecost underlines the opportunity that will come with working alongside Telford Homes, which Trammell Crow Company also owns, as well as its logistics business. CBRE Investment Management is also a joint venture partner.
“From a development perspective, I see a lot of opportunities in the market that require expertise in BTR and offices, especially city centres,” said Pentecost. “Local authorities want you to have it, and increasingly investors want you to have it, because of the push into BTR generally.
“The market is quite bifurcated when it comes city centre development. Some do resi, some do offices. Very few do both, so it’s an interesting opportunity for us to get into early conversations in the planning stages to say we can deliver both.”
Rees said large-scale, mixed-use sites are “on the table” for the business in a way that they never had been before. “We wil still be specialist, but we will have the ability to unlock mixed-use sites,” he said. “With the way the world of planning is going, turning up with the ability to put a resi hat on and a commercial hat on is very attractive when you are approaching certain local authorities around planning.
“One site today might suit commercial and a bit of resi, but as time goes by, that might turn on its head. Being able to put different hats on, depending on the geography and the market, allows you to do more business.”
That approach will lend itself to “larger-scale projects, phased developments and proper placemaking”, said Rees. The ambition is to create schemes that become household names, joining exemplars such as King’s Cross, Station Hill in Reading, White City and Broadgate, where there is “a real mix” of uses. “That’s the stuff we want to be doing,” he said.
Pentecost said that with the acquisition the business will harness TCC’s “broad, robust platform” to accelerate its growth and capture the high-end rental market that comes with providing “new-era” office buildings.
“Look out for us,” said Pentecost. “The business as a whole is already travelling at such speed, and this is our opportunity to get onto a fast-moving vehicle in our marketplace.”
To send feedback, e-mail pui-guan.man@eg.co.uk or tweet @PuiGuanM or @EGPropertyNews
