London office landlord braces for recessionary hit to rents

LONDON: London landlords are bracing for an unfolding recession.

“It is clear that we must plan for a recession with an increase in unemployment, leading to reduced occupational demand for space, implying falling rental and capital values,” Toby Courtauld, chief executive officer of Great Portland Estates Plc, said in an earnings statement yesterday.

The city’s real estate titans are grappling with the sudden forced closure of millions of businesses, imperiling rent payments and raising questions about how the virus could change demand for office and retail space long term.

But with lower leverage and far less vacant space compared to more than a decade ago, the impact that the downturn will have on property owners remains unclear.

Great Portland Estates suspended its guidance on rents as it awaits visibility on the shape of recovery from the coronavirus crisis.

The landlord said it could withstand an unprecedented 70% hit to values before breaching loan terms.

It collected 71% of the rent due by the end of March, with most of the unpaid amount due from stores and restaurants the occupy the ground floors of its office buildings.

The company also announced that Exane BNP Paribas’s cash equities business has signed a lease for a new headquarters at a new office building on London’s Oxford Street.

Great Portland Estates is a British property development and investment company.

It is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index.