Shaftesbury’s higher valuation is a sign of West End health

  • Valuation of Shaftesbury’s portfolio recovers slightly
  • West End attendance still down from 2019 levels

The past two years have been difficult in the West End. Multiple pandemic waves and resulting lockdowns have hit retailers and hospitality businesses hard as landlords faced the choice of shaking off their tenants for money they often don’t have or simply accepting that they wouldn’t get anything.

This dynamic has been felt across the UK as the pandemic has seen retail and hospitality businesses attempt to stay solvent by negotiating delayed or canceled rents. For owners like Shaftesbury (SHB), which owns 16 acres of real estate in the West End, it hit profits as rent collection fell off a cliff. As of November 30, 2020, for example, he had collected 53% of the contractual rent for the six months ending September 30, 2020, waiving or deferring 34% of the rent due.

Two years on, London’s cultural hub is recovering, albeit tentatively, with Shaftesbury’s latest assessment 100% owned portfolio serving as a barometer for the world famous district. It climbed 15% to £3.3bn as of March 31 this year, from a low of £2.8bn the year before. The valuation is still well below the pre-Covid figure of £3.8bn, however.

The update has general manager Brian Bickell in a jubilant mood. He points out the difference between the West End and the City of London at the moment – arguing that the former is much more like its old self.

“People are back in their offices in the West End, and it’s a whole lot better than the City of London which is completely dead,” he said. As of April 28 this year, estate agency Savills said there was around 12.9 million square feet of vacant space in the City of London, compared to a five-year average of 8.3 million square feet.

The West End office market is not just important to Shaftesbury because of the footfall it brings to retail, hospitality and leisure businesses, but because the landlord’s portfolio comprises 21% office by area – residential also accounting for 21% and retail, hospitality and leisure assets accounting for the remaining 58%.

Hunter Booth, manager of the West End office branch in Savills, explained that the liveliness of Shaftesbury’s retail businesses affects the appeal of its offices and vice versa. “It’s what you buy – especially with the Shaftesbury offer – it’s that momentum,” he said.

Despite Bickell and Booth’s optimism, there are headwinds for this drive. As of April 28 this year, Savills pegged office vacancy in the West End at around 6.5%, down from a ten-year average of 4.1%, as retailers and hospitality businesses face large challenges.

“The main concern for retailers at the moment is staff – followed closely by the cost of living,” said Kate Nicholls, chief executive of UKHospitality. She explained that the two are linked because the rising cost of doing business is fueling the cost of living crisis.

“It remains a very volatile and unpredictable market at the moment,” she added.

None of this is helped by the fact that West End footfall remains well below pre-Covid levels – with the Heart of London Business Alliance calculating it is down 31% for the week starting the 25th April compared to the same week in 2019.

Shaftesbury may well be safe from the worst due to the West End’s unique position as an international rather than just a national shopping destination, and Savills’ Booth is confident the office market will also recover depending on the number of office requests. the space he sees in his inbox. But it is not yet clear when or if the West End will return to its former glory or if Shaftesbury’s portfolio will return to its pre-Covid valuation.


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