The “hotelification” of London office space helped British Land report forecast-beating profits today, as companies lure workers back for more days of the week while the capital continues to move on from Covid.
Occupancy rates at the owner of the Broadgate Centre in the City and the Regent’s Place development in Kings Cross are around 96%, helping it report profit for the first half of the year of £142 million, up 3.4%.
Its chief executive, Simon Carter, told the Standard that with the return to work underway, customers were after a more modern office environment. “The experience in and around the buildings has become much more important, people are talking about the ‘hotelificaton’ of space, so the shared space feels more like a hotel, or your home, than a corporate reception.”
He also pointed to a move into “campus” environments, with a blend of commercial premises, including restaurants and bars and other leisure options, which are also changing the traditional mix of London’s business centres.
Broadgate, long popular with financial companies, is now attracting more media and technology businesses and is adding to its traditional strength by becoming home to firms in the fast-growing fintech industry.
“It appeals to a wider range of customers,” said Carter, “It’s right next to Spitalfields, Shoreditch, Old Street,” with the northeastern edge of the City proving now popular with firms of a range of sizes.
“We provide a full range of space, incubator space for startups , bigger space for scale-up businesses, where they want fitted labs or fitted offices, and then your more traditional headquarters.”
But rising interest rates took a bite out of British Land's asset values, with two key industry measures falling – its portfolio at valuation was down 2.5% to £8.7 billion and net tangibles assets per share fell almost 4% to 565p.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, pointed out that British Land "remains positive that rates have peaked", adding: "Should that be true there will be space for a recovery, but the higher-for-longer narrative does clip potential in the medium term.
Regent's Place near Kings Cross is another example of the changing character of corporate tenants in the capital. Growing demand for lab space from a cluster of life sciences firms in the area is drawing in young companies with particular needs.
Carter said: "We just signed a memorandum of understanding with UCL, where we are hopefully going to be able to provide space for the spin-out businesses that come out of the university ... where you've got a really exciting mix of life sciences data sciences and big technology and so we are converting some of the spaces to labs.
"it really benefits from the cluster around there. You've got UCLH, teaching hospital; UCL, the university; Francis Crick Institute, which leads on life sciences; [and] the Turing Institute on artificial intelligence."
British Land has also moved into Urban Logistics centres in London, warehouses for the last mile of deliveries, which are more common in other densely populated urban areas and are becoming more commonplace in the capital. And it noted a rebound in demand for shop space in retail parks, that can be more flexible.
The company's shares rose 16p to 330p, a rise of 5%, taking to the top of the FTSE 250 leaderboard.
