Nothing says commitment like half a billion pounds.
In May, British Land made a very public bid to focus on West End offices, after raising £1.7bn since the start of the year.
Last week it slapped down £470m on the table, buying the majority of the 1.2m sq ft Paddington Central site.
Two days ago it launched ?10 Portman Square, W1 , the 134,000 sq ft office building it developed in the Baker Street Quarter. It’s the latest of four West End projects – a pipeline which includes the Clarges Estate, W1 – on the British Land conveyer belt this year.
Clearly this new strategy isn’t a softly, softly approach.
The latest move slashes the proportion of its City office portfolio from two-thirds of ?its total portfolio in 2009 to nearer 40% today. This split between City and West End offices feels about right for now, says James Danby, director of London leasing at British Land.
“The acquisition of Paddington Central means the majority of our office portfolio is now in the West End, and underlines that we see the supply and demand dynamics in this market driving rental growth in the future,” says Danby.
Taking that leap isn’t as clear cut as many seem to think. First-half figures for 2013 show the West End took quite a dive. Take-up dropped 11% to 1.1m sq ft compared to the first six months of last year, according to EG’s London Office Research. That’s against a rising central London market that saw take-up of 5.7m sq ft, up almost 50% on the year to the end of June.
Agents point to a chronic undersupply choking the market, but that belies rents which dropped £5 per sq ft in the first six months of this year.
British Land has placed 10 Portman Square on the market at £90 per sq ft, and lettings already done are believed to be largely in line with this, a record for the area. This hooked in Aramco, which had been at Berkeley Square and Danby hopes other Mayfair occupiers might follow.
He says serious negotiations for the remaining space are under way but it seems nothing is imminent at the moment. There’s little doubt the West End is falling behind. The sector failed to land a single tenant in the London top 10 deals of Q2. Instead it scraped in an appearance at number 13 in the 45,000 sq ft Thames Tunnel letting at The Point, W2, a deal which was actually signed by Instant Offices and was almost five times smaller than the quarter’s largest deal to Amazon, at Sixty London, EC1 .
Despite this, Dante is upbeat. “We’re pretty bullish about the West End market, it’s had its ups and downs and people read a lot into that,” says Danby. “Take-up over the first half of the year may be slightly down compared to 2012, but we are confident this does not reflect a decrease in demand.
“Occupier confidence does seem to be returning, and the slight downturn in take-up over the first six months of the year is largely attributable to the shortage of grade-A stock in core West End locations.
“Significantly for us it will mean occupiers that would have traditionally gravitated towards Mayfair will look at other areas.”
