Derwent London and Shaftesbury are two of London’s most respected listed landlords. Both are specialists in their chosen locations and both focus not on bricks and mortar but on the people that occupy their buildings. James Max sat down with the two companies for this month’s Real Talk
“To us, buildings are just envelopes of space. It is what goes on inside them that keeps them relevant. Their ultimate sustainability is the economic activity that goes on inside them. It is the people really. Buildings are about people. They have no intrinsic value in our view.”
It is not a statement you would necessarily expect from the chief executive of a West End landlord, but it is a refreshing one.
Brian Bickell is chief executive of Shaftesbury, a listed propco that owns some 14 acres of London’s West End valued at £2.6bn. But for him, Shaftesbury is not really a real estate company, it is a consumer-facing business, a creator of “clusters of interest”.
The same is true of Derwent London. It too is a listed corporate entity, with a vast and valuable portfolio (spanning 5.7m sq ft and valued at £4.2bn), but views itself quite differently to its propco contemporaries.
“For us it is all about creating space,” says chief executive John Burns. “We don’t do corporate. Yes, we are corporate, we are a listed real estate investment trust, but we don’t do standard corporate space. We like volume, light, good height, clear space, uncluttered space.”
For both Derwent and Shaftesbury, the focus is on what goes on inside their buildings, not the buildings themselves. Occupier wants and needs take priority.
“Our fundamental philosophy is based on people wanting to come to the West End,” says Bickell. “In this day and age you have to create a point of difference and an experience for people to come here.”
He says that the nature of Shaftesbury’s stock – the average age of its buildings is more than 150 years old – means that it cannot compete with modern shopping centres and offer the big-name retailers what they want from a store. What it can do, however, is create villages and give the independents and start-ups a chance.
“A lot of our 330 shops are really quite tiny by shopping centre standards but they create interesting bits of affordable space in the West End,” says Bickell. “Some people would say our focus on independents is a risk, but it is not a risk here. It is part of the magic of the West End. You find something different.”
He adds: “We are not the slightest bit interested in tenant covenant. Yes, we do make some due diligence checks, but actually strong covenant or even offering the highest rent will never get you into any Shaftesbury village. It’s about what you are going to bring that is interesting, about how you are going to help us bring footfall, making the whole area prosperous.”
The same is largely true at Derwent, where understanding what the tenant wants – sometimes even before the tenant really knows what it wants – is paramount.
“We are the company that takes companies to places they don’t want to go to,” says Burns proudly.
He cites the Johnson Building in Hatton Garden, EC1, a property in the heart of London’s jewellery quarter and just that little bit too far from the West End or City. The award-winning 157,000 sq ft building – primarily let to Grey Advertising – had attracted the interest of Burberry. The fashion house could not quite get its head around the location but wanted something similar. Derwent had just the property, says Burns.
“We had bought a building in Horseferry Road in Victoria, SW1, the poor end of Victoria,” he says. “They asked if we would be able to do the same as we had done at the Johnson Building with it. We said we thought we could do even better so we moved a major brand in Mayfair and St James’s to the back end of Victoria.
“It showed you that people wanted sensational space. They wanted to be creative, not in standard corporate offices.
“We did so well with that space that we bought the building opposite and they took that as well.”
Derwent’s head of leasing Celine Thompson adds: “I think we were the original disruptors within the property industry because all of the original buildings that I certainly worked on were far and beyond what the West End agents understood and knew.
“Gradually, over time, when the brand got bigger and people started to understand and appreciate design, they understood that you could go further afield where the rents were more economical and the design was fantastic.”
The ability to create is at the heart of what both Derwent and Shaftesbury are seeking to achieve in their businesses. Both count the creative sectors among their biggest occupiers, be that the tech creatives that pepper Derwent’s portfolio or the fashionistas and restaurateurs that call Shaftesbury’s estate home.
“Our whole ethos really is to work with our tenants,” says Bickell. “We try to make it a partnership because we are working together with the same goal. Shaftesbury will not prosper unless our shops and restaurants are prospering. Our job is to create a sort of stage set for them.”
Thompson agrees. “We were always really centric on design,” she says of Derwent, “and out of good design always comes great creative companies. Over time we understood the DNA of these creatives. Because our buildings were not in prime locations we had the advantage of getting the artists, the Soho tenants who could no longer afford prime West End and as a consequence we spoke to them and got to know their businesses. We started to interpret what the trends were going forward and incorporated that into our design.
“It was really just listening to what these original tenants were telling us and learning and passing that on.”
For Shaftesbury and Derwent, the property industry around them is somewhat lagging behind other industries in learning and listening to what the people want and need.
“We really need to adopt an attitude that we are providers of space and that we build the built environment. We create a built environment for everyone to use so we need to understand how people are using that space,” says Bickell.
“Buildings have no value without people in them, but we don’t necessarily always get that in the world of real estate.”
Real Talk with James Max is a monthly audio show produced by EG Radio. Every month BBC broadcaster Max meets leading executives from the real estate world for insights into their businesses and a glimpse into what makes them tick. To tune in and listen for free, visit www.estatesgazette.libsyn.com and select the Real Talk category. Share your feedback and ideas for future guests with us by tweeting @estatesgazette using the hashtag #realtalk
