Flex space could become the dominant use type across Great Portland Estates’ office portfolio, says chief executive Toby Courtauld.
Announcing its full-year results for the 12 months ended 31 March today, the group said that some 13.2% of its office space was now flex space, with Courtauld anticipating that to rise to 20% within the next 12 months.
The firm has seen its flex space increase by 22% since March 2020 to 267,000 sq ft and Courtauld reckoned that the offer could start to dominate the market in the near term.
While HQ space is likely to remain more traditional, he expects requirements in the 3,000 to 5,000 sq ft space to be largely flex.
“I think that, over time, it’s really possible that it does become a much more significant part of our business,” said Courtauld. “The lease duration is actually not dissimilar to what it’s been for a long time with our previous operating metrics for space in that size bracket where we were doing three- to five-year deals anyway.”
He added: “We’re spending more on the spaces, but in turn, what we’re doing is generating a stickiness with our customers who will stay with us. And we’re clearly generating a higher revenue per foot.”
Chief financial and operating officer Nick Sanderson highlighted flex space as one of the key targets in the firm’s £1.7bn investment opportunity pipeline.
Despite delivering its lowest revenues for more than five years, GPE said it was confident in its future performance and that of London.
The group is working through its largest ever programme of development, with around £860m of capex going into two on-site schemes and four near-term projects, and is seeing strong occupier activity with some £40m of leasing deals in negotiation.
Rent collection has been improving quarter-on-quarter and with office rent collection now at 91%, the company has more than £440m of available cash and an LTV of just 18.4%.
“Over the last year we have been operating in some of the most challenging trading conditions we have experienced. Our markets in central London have been in lockdown for much of the time, affecting all aspects of life and impacting our operations. Despite this context, GPE remains in robust health with a strong balance sheet given our low leverage and high liquidity, allowing us the capacity for significant investment to drive growth,” said Courtauld.
He added: “While uncertainty remains, we are encouraged by the recent acceleration in enquiries we are receiving from prospective occupiers, particularly for our prime grade-A and flex office products. As a result, we expect to grow our flex office offer and to bring forward our near-term development programme, committing circa £900m of capital expenditure to deliver exemplar, net zero carbon spaces designed to satisfy the changing needs of tomorrow’s occupier.”
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