Property majors press ahead with major commercial construction schemes

Image credit: Wilkinson Eyre

Recent results from major quoted property groups such as Land Securities, British Land and Gt. Portland Estates suggest that the construction industry’s largest private clients share Glenigan’s cautious outlook on new office development. But they are also pressing ahead with some major commercial construction schemes which will buoy up tender opportunities, both in London and the regions.

At British Land, chief executive Chris Grigg said last month that he was mindful of the uncertainties in the market. But he also noted that demand for the group’s office space was healthy with businesses continuing to commit to London and the supply of high quality new space is constrained in the short term. The firm’s ‘campus’ offering is driving demand for its space and it has launched a flexible workspace offer, Storey.

Construction pipeline

Indeed, British Land has doubled its committed construction pipeline of new space to 1.6 million sq ft although the speculative element is limited to 4.5%. The group has also processed planning consents covering 1.9 million sq ft of construction projects, including a major £300 million extension to its Meadowhall Leisure complex in Sheffield. It has also submitted a planning application for the Canada Water Master Development Agreement which will involve building projects for 3,000 new homes, two million sq ft of workspace and one million sq ft of retail and leisure space in Southwark.

Meanwhile, Land Securities recently held out the prospect of a return to speculative development. While the group’s current development activity is based on pre-lettings – and it says Brexit is likely to lead to fewer construction project commitments – chief executive Robert Noel said speculative development will “become an attractive option in due course.”

Land Securities has also seen demand for office space in London somewhat stronger than expected over the past year. The group has progressed plans for 1.4 million sq ft of building project developments and it is looking at plans for a further 0.8 million sq ft of space over this year. It is also looking to grow its pipeline with acquisitions and partnerships.

Land Secs has recently started construction works on a huge 564,000 sq ft new building at 21 Moorfields, which is being built over an entrance to Liverpool Street Crossrail station and where Deutsche Bank has taken much of the space. Construction works are set to complete by late 2021. The group is also planning a 142,000 sq ft mixed use development at Sherwood Street in the West End, where it hopes construction works will start by April 2019. Two major schemes in Southwark are also planned including a 135,000 sq ft mixed-use scheme in Sumner Street where it hopes construction works will start in 2019.

Development potential

At London-focused Great Portland Estates, chief executive Toby Courtauld said in May that the group was planning for continued economic uncertainty but looked to the future with confidence. Occupier demand remains healthy across the group’s retail and office portfolio which has 1.7 million sq ft of development potential, of which 0.4 million sq ft of were now on construction sites.

Indeed, Gt Portland has recently started three new construction projects, all near to Crossrail stations. They will provide 412,000 sq ft of Grade A mainly office and retail space, including 221,300 sq ft at its Hanover Square scheme which is 26% pre-let.

The group has also made good progress on its substantial future development pipeline, involving some 13 building projects covering 1.3 million sq ft. And after five years of net sales, the group notes it has the financial strength to exploit any market weakness where it unearths it.