Capital’s property market is ‘a league apart’ from the rest

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LONDON’s West End is still booming, despite subdued business and consumer confidence across the UK, according to developer Shaftesbury.

Shaftesbury, which owns more than 500 properties in top locations such as Covent Garden, Chinatown and Soho, provided strong evidence that London is well-placed to cash in on the Diamond Jubilee and the Olympics.

A Yorkshire-based analyst said that the London property market was leagues apart from the rest of Britain, but provincial retail centres like Leeds could act as a beacon for the regional economy.

Some analysts believe that falling rents in secondary retail centres could also provide an opportunity for fledgling entrepreneurs.

Yesterday, Shaftesbury revealed that its adjusted profit before tax for the six months ended March 31 was £16.1m, compared with £14m for the same period last year, an increase of 15 per cent.

Rents receivable across the group rose by £3.7m to £40.3m, reflecting income from acquisitions together with continuing “good demand” and low levels of vacant space,

Brian Bickell, the company’s chief executive, said yesterday: “London’s West End continues to be busy and prosperous. Throughout the first six months of the financial year our portfolio has been virtually fully let as demand for uses across our West End locations remains healthy.

“London’s reputation as a destination of world renown continues to grow, and this summer’s major events – the Queen’s Diamond Jubilee and the Olympics – will put the city firmly in the world’s spotlight. These events are a unique opportunity for London to promote its many attractions to a global audience.

“Our portfolio, underwritten by the West End’s special features and attractions, continues to flourish and we remain confident that it will continue over time to deliver rising income and rental values.

“This in turn should bring long-term growth in capital values which, coupled with low obsolescence in our assets, should allow us to maintain our record of out-performing the wider property market.”

Mr Bickell told the Yorkshire Post that “the rest of the world seems to be in love with London”.

During a period of uncertainty in the eurozone, people will be a bit fussier about how they spend their money, he added. He highlighted the fact that plenty of Chinese and American tourists were coming to London.

“London has got to go hell for leather to promote itself this year,’’ he said.

Alex Munro, a Leeds-based partner at Knight Frank, stressed that the London market was very different from the rest of Britain.

He said: “Our central London team sold to people from 63 nations last year. London is a top five global city. That doesn’t mean to say that the rest of the UK is a basket case.

“Leeds is a shining beacon in the retail market. Retail is changing rapidly.

“People are concentrating their efforts on primary retail sites. The strong retail centres like Leeds and Newcastle are getting better and stronger, at the expense of other cities and towns.”

The successful retail centres were likely to have a strong leisure offering, Mr Munro added, and some market towns were still doing well.

But he added: “People are voting with their feet at the expense of smaller secondary locations.”

However, as rents and values fell in secondary locations, there was scope for entrepreneurs to move in and establish businesses.

“The market usually does sort itself out over time,” he added.

Matthew Barnsdale, retail consultant for Yorkshire at Lambert Smith Hampton, said falling rents would give scope for more retailers to get space at secondary high street locations.

He added: “London is almost an economy in its own right. It’s leagues apart.”

He said there was still nervousness in the Yorkshire market, with a growing number of “opportunistic” short-term flexible lease deals being signed.

Roger Kemp, director in Jones Lang LaSalle’s Retail Agency team, predicted that the gap between winners and losers would grow.

He added: “According to our research, up to 50 per cent of existing high street leases are due to expire by 2015 as we are coming to the end of the 1980s’ 25-year leases, and the 1990s’ 10-year leases and sub-10 year leases of the last decade.

“We have not yet seen the true effect of the shift in demand on our retail landscape, but the next 24 months are likely to see a swift and dramatic playing out of these structural changes.

“The 2015 lease expiry spike will allow retailers to rationalise their portfolios and effectively walk away from leases via natural wastage. We will continue to see more divergence between winners and losers, however we believe that this will only increase the polarisation between prime versus secondary locations.”

Shaftesbury’s strategy

SHAFTESBURY invests in popular parts of London’s West End.

The investments are close to shops, restaurants, theatres, cinemas, galleries, museums and historic sites.

In a statement to accompany its half year results, the company said: “Reflecting the importance of the visitor-based economy in our chosen locations, our strategy is to establish clusters of ownerships in areas which have, or have the potential for, retail and leisure uses.

“In the West End these uses have a long history of sustained demand.”

The company was founded by Peter Levy in 1986, when it acquired 32 properties in Chinatown.

The following year, the company made its debut on the London Stock Exchange.

In 1987, a placing at £1.80 per share raised £8m additional capital.