Businesses are committing to new offices and shops as Covid-19 restrictions loosen, according to one of the capital’s leading developers.
Great Portland Estates said on Thursday it had leased 185,000 sq ft of office and retail space in the three months to the end of June, more than five times the amount it had leased in the previous three months. Toby Courtauld, chief executive, said momentum was continuing to build.
With July 19 set as the date when coronavirus restrictions are scheduled to lift in England, occupancy of its buildings was picking up and interest from prospective tenants was growing, he said.
Great Portland’s central London offices are operating at about a third of capacity, up from lows of 10 per cent last year. But with cases rising rapidly, Courtauld cautioned that a return to normality “is going to take a while”.
Vacancy rates across London have spiked during the pandemic, with occupiers looking to ditch space that has become surplus to requirements.
The vast majority of that space has been in older blocks, according to estate agent Savills, and even against a backdrop of empty workplaces, and with uncertainty about the return to work, some businesses are willing to pay peak rents for new space.
Great Portland let an office on Dufour’s Place, Soho, for more than £200 a sq ft during the period, a record for the company, according to Courtauld.
Demand has been particularly high for offices that have high sustainability credentials and offer flexibility, as businesses seek to reduce their carbon footprint and adapt to a hybrid future of work.
In a sign of the changes under way on the high street, Great Portland also agreed a 15-year lease with Boom Battle Bar, an “adventure bar” that allows customers to play games while they drink. The bar will take a large underground site on Oxford Street, a destination traditionally synonymous with retail.
“The letting is clearly encouraging, particularly given the current retail backdrop, and demonstrates the trend of physical retail becoming more experiential,” said Stifel analyst Sam King in a note.
The FTSE 250 landlord charged an average £71 a sq ft for lettings in the period, below the £87 in the prior quarter. The difference was down to the type of space leased during the period, said Courtauld.
Great Portland collected 86 per cent of the rent it was owed for the quarter, a better rate than any of the previous four quarters. Landlords have been hit by low rent takes throughout the pandemic, particularly from retail and hospitality businesses, with tenants currently protected from eviction by the government’s coronavirus measures.