The management team at Palace Capital expects the UK’s regional office markets to be given a lift as corporate occupiers look away from central London properties in the wake of the coronavirus pandemic.
Chairman Stanley Davis offered the outlook as the REIT published interim results for the six months to 30 September. Palace Capital posted a loss of £7.2m, which it attributed to a £10.5m decline its portfolio valuation.
Davis said that although working from home guidance during the UK’s lockdowns has dented office occupation, “Our strong view is that this shift in working patterns will benefit the regions as companies reflect on the requirement for expensive central London offices.
“Debate around the demise of the office is premature and recent lettings activity shows that employers remain convinced of the role of the workplace,” he added. “Significant prelettings in excess of 80,000 sq ft have recently been announced in the city centres of Edinburgh, Manchester and Leeds.”
The company has £26.3m of cash and debt facilities, which it said will allow it “to handle any unforeseen circumstances and to take advantage of potential opportunities in the short to medium term”. One new investor has suggested that money would be best spent buying back its shares.
Davis added: “Previous forecasts of the demise of the office – in the early 1980s with the advancement of computer technology and again in the early 2000s during the dotcom era – proved unfounded and our view is that they will again.
“We have always pursued a very disciplined acquisition strategy, which has focused on good quality assets in town centres and close to transport hubs, including major railway stations, so we firmly believe that we will see continued demand for our regional offices, particularly in Manchester, Leeds, York, Newcastle-upon-Tyne and Liverpool.”
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