GPE suffers £253m pretax loss as valuations fall 10%

GPE has posted a £253m pretax loss as new lettings slow and valuations tumble. Some 37 new leases were signed during the first half, providing annual rent of £11.2m, with GPE’s share totalling £10.5m. This compares with 63 leases signed in H1 2022, generating more than £15m. However, market lettings for the period were a record 13.4% above March 2023 ERVs, with offices at 11.1% and retail at 18.1%. The pretax loss of £253m is considerably steeper than the £86m loss suffered in H1 2022. Chief executive Toby Courtauld said: “Whilst macro-economic concerns and rising interest rates impacted our property valuation, the fundamentals in our leasing markets remain healthy. With customers increasingly demanding the very best sustainable spaces, and discounting the rest, they are competing in a market increasingly starved of new, grade-A supply, putting further upward pressure on prime rents and we have upgraded our rental growth forecasts for the second half.” The REIT said it was on track to create 1m sq ft of flexible office space by 2026. To date it has assembled 434,000 sq ft of flex space, comprising 128,000 sq ft of fitted space, 189,000 sq ft of fully managed space (of which 75,000 is let with the remainder under refurbishment) and flex partnerships of 117,000 sq ft. The REIT pulled in revenue of £47.6m, up from £43.5m in H1 2022. Courtauld said the investment market was not likely to pick up this year. “With further selective yield expansion a possibility, our investment markets remain relatively quiet, although we are exploiting these conditions to our advantage. We bought three buildings in the period, all off-market and adding to both our flex and development programmes,” he said. “Looking forward, we expect further acquisition opportunities to emerge and, with our trademark disciplined capital management, we will continue to recycle capital, selling properties to crystallise value on completion of our business plans.” The valuation of the group’s properties was £2.30bn as at 30 September 2023, down from £2.38bn in March. This reflects a valuation decrease of 10.3% on a like-for-like basis since 31 March 2023. Flex office space reduced in value by 7.1%, outperforming the group’s wider office space, which fell by 9.6% in value. He added: “In this context, GPE’s positioning is strong; 75% of our portfolio is in the heart of the West End; our substantial capex programme will deliver the prime spaces the market demands; our flex office offer is growing, is well suited to evolving customer needs, as evidenced by our market-leading NPS score, and is delivering our highest rental growth; and our strong balance sheet and plentiful liquidity combined with our long track record of creating opportunities in cyclical markets means that we are well positioned to capitalise. With GPE in great shape, and London set to outperform, we look to our future with confidence.” To send feedback, e-mail piers.wehner@eg.co.uk or tweet @PiersWehner or @EGPropertyNews