Retail

Strategic report

Property portfolio Office

£920.8m

VALUATION

2021: £908.4m*

£25.3m

RENTAL INCOME

2021: £28.8m*

12.2%

CHANGE IN RENTAL INCOME

2021: 14.5%*

*Restated for comparative purposes following reclassification of assets within Other.

Office income totalled £25.3 million, a decrease of £3.5 million against the previous year. The Office portfolio represents 18.7% by income and 19.9% by value of the total portfolio. The rental value of our Office portfolio decreased by 12.2% but the like-for-like valuation increased by 3.4% due to an improvement in our grade A stock.

The performance of the Office sector continued to suffer due to the ongoing impact of the pandemic as tenants exercised their breaks or exited upon lease expiry. The rate of income downturn has slowed as occupiers started to identify their office requirements alongside their work from home policies. This has coincided with several of our office refurbishments completing into an undersupplied market. This increase in demand saw significant enquiries during the second half of the financial year, creating our busiest period of the last two years, with nine office lettings completed.

Significant lettings during the year included 4 Grotto Passage, a self-contained, three-storey building of almost 4,000 sq ft. This building was refurbished several years ago and had been under offer for many months during the pandemic with the tenant failing to complete. A boutique venture capital firm, Stride, took the space to expand its seed stage technology investment. We have also successfully modernised space at 7-10 Chandos Street to create turnkey, fully fitted offices in open configuration. The new space has attracted significant enquiries and from this we have agreed to let 3,280 sq ft to Hannam and Partners, a small investment bank. 35 Queen Anne Street, a townhouse measuring 2,952 sq ft was let to Tennants Consolidated, the largest independent distributor of chemicals within the UK, as its corporate head office.

During the year, we commenced several refurbishments including 11-12 Wigmore Place, 79 Wimpole Street and amongst other projects, completed 7-10 Beaumont Mews which attracted significant interest and was pre-let. With changing demands for office space, we have partnered with two flexible office providers, WorkPad and Space Made, to diversify into this product offer which is largely absent from Marylebone. We earmarked four properties for these specialist operators to cater for occupiers seeking shorter leases but with an enhanced service level. WorkPad were successful in letting our 7,000 sq ft period property at 19 Portland Place to an innovation arm of Rolls Royce who were interested in accessing the increased service levels provided.

During the year we disposed of two office properties, 4-6 York Street, and 2 Cavendish Square, both identified as non-core, and taking advantage of excellent market sentiment for good investment stock. Aligned with our strategic objectives, the proceeds will be reinvested back into the estate.

Our strategic focus over the next few years will be to ensure that our portfolio is fit for purpose, making sure that it achieves the required sustainability standards, whilst meeting ever-evolving customer needs as working practices change.