Residential

Strategic report

Property performance Residential

Residential income was £29.1 million, a decrease of £2.8 million and 8.8% below last year. This decrease in income has been driven by the pandemic. Whilst the rental performance was significantly impacted, the valuation of our residential properties fell from £1,285 million to £1,243 million. This was a decrease of 3.3% in absolute terms, however after adjusting for disposals and capital additions, the like-for-like movement was a fall of 3.5%. Residential values have flattened since the central London market peaked in 2014 after sharp increases in stamp duty land taxes, although values in Marylebone and the West End have remained strong relative to neighbouring boroughs. Despite the immediate impact to rental values, capital values for residential properties remained strong within London, resulting in a small decrease compared to the movement in rental income.

The pandemic had a sudden but potentially short-lived impact on our Residential portfolio. Whilst rent collection rates remained strong through the year, vacancy rates rose significantly. As the sector has shorter term leases, the impact of downturns is immediate. Some residents exercised their rights to break or not renew their leases to allow them to move out of London whilst Government work from home guidance was in place. In addition, the number of overseas students renting properties fell due to travel restrictions and a shift to online lectures and tutorials. This resulted in a significant number of units coming back to the Group which then required refurbishing.

Due to similar vacancies recorded in competing rental portfolios across London, increased supply was evident for most of the year. Consequently, rental values experienced pressure when compared to the previous year, as prospective tenants had a wider range of accommodation to choose from. Our focus has been to reduce voids and secure longer-term income where possible. As Government restrictions have eased, we have seen the demand for residential flats increasing and in turn vacancy levels reducing, with strong rental growth being achieved closer to pre-pandemic levels.

Whilst we have seen increases in vacant units during the year, we have continued to look at ways to improve the services that we offer to residents. Despite the lockdown restrictions, we continued to support our residents by having an on-site maintenance team based on the Estate. The remainder of the team balanced remote and in-office working, depending on the customers’ needs, whilst maintaining safe social distancing in line with guidelines.

With the work from home guidance in place across the UK, the decision to install fibre direct to all of our residential premises in partnership with G.Network in 2020 became more important than ever for our existing and future residents. All our homes are expected to have this connectivity in place by mid-2022. This service is inclusive in the rental income.

Results from our customer survey shows overall satisfaction with the experience of renting from Howard de Walden remains high at 88% (2020: 85%).

In common with last year, we did not purchase any residential property but continue to refurbish our existing stock to the standards expected for Marylebone. Good examples of this are the flats at Stone House (9-11 Weymouth Street), 9 Devonshire Mews South and 83-92 Marylebone High Street which are expected to be ready to let shortly.

Flat 3, 85 Marylebone High Street

82 Portland Place – Suite I Flat 4, 92 Marylebone High Street

Strategic report

Property performance Office

RENTAL INCOME

2020: 23.3%

VALUATION

2020: £988.8m

£28.7m

RENTAL INCOME

2020: £33.7m

14.8%

CHANGE IN RENTAL INCOME

2020: “1.8%