Great Portland Estates Plc · LSE:GPE
Great Portland Estates — H1 2024 Earnings Presentation
101 slides from Great Portland Estates's earnings presentation, November 2023
Slide 1: Half Year Results 2023
Half Year Results 2023 We unlock potential, creating sustainable space for London to thrive
Slide 2: Macro Concerns & Return of the Cycle: GPE Positioning is Strong
Half Year Results 2023 Macro Concerns & Return of the Cycle: Opportunity GPE Positioning is Strong • Rates & yields up, affecting valuations • Customer demand for our space is good • Cycle; opportunity off lower valuations • Rents rising; office & retail • We’re developing; we’re growing Flex • We’r
Slide 3: Agenda
Agenda Introduction Toby Courtauld, Chief Executive Financial Results & Nick Sanderson, Chief Financial & Operating Officer Flex Market Business Update Toby Courtauld, Chief Executive Outlook Q&A ir@gpe.co.uk 3
Slide 4: Strategy
Strategy Addressing all the key themes Key Themes… … Addressing Each Through Our Strategic Givens Low financial leverage; through the cycle Macro challenges focus on in-demand markets with supply shortage Create the best; leasing well & prime rents rising Best outperforms rest 100% central London; 7
Slide 5: Operating Well
Operating Well Strength and opportunity 1. Strong Leasing Continues; Low Vacancy; More to Come £m 20.0% ERV Investment Lettings Pre-lets Vacancy 60 Rent PA1 vs Mar ‘232 13.2% U/O £7.3m +5.7% Flex +13.6% 10.8% 40 10.0% Office +11.1% 4.8% HY £11.2m +13.4% Flex +12.2% 3.5% Retail +18.1% 20 2.0% 2.5% •
Slide 6: Agenda
Agenda Introduction Toby Courtauld, Chief Executive Financial Results & Nick Sanderson, Chief Financial & Operating Officer Flex Market Business Update Toby Courtauld, Chief Executive Outlook Q&A ir@gpe.co.uk 6
Slide 7: Financial Results
Financial Results Impacted by higher interest rate environment Portfolio and Net Assets Sept 23 Change EPRA NTA (p) Portfolio value1 £2,302.7m (10.3%2) 800 757 750 EPRA NTA & IFRS NAV per share 650p (14.1%) 700 5 650 650 -86 -18 -8 Rent Roll £110.9m +4.2% 600 550 500 Mar '23 Wholly Owned JV EPRA EPS
Slide 8: Property Valuation
Property Valuation1 ERV growth 1.8%; yield expansion 43bps; but best continues to outperform with 75% portfolio in West End ERV Growth Resilient; Yield Expansion Driving Value Decline… … with TEY4 up to 5.2% Today % of Property ‘Topped Up’ Initial Yield True Equivalent Yield 6 months portfolio Valua
Slide 9: Balance Sheet Strength
Balance Sheet Strength Low leverage and high liquidity GPE Target LTV Range = 10%-35% through the Cycle Extensive Liquidity (£m) EPRA LTV1 (%) £250m unsecured ESG-linked 3 year term loan Mar ‘09 700 S+175bps 44.9% Sep ‘12 37.7% 600 666 40% 618 608 35% 500 Sep ‘23 508 28.9% 400 472 457 GPE LTV 443 41
Slide 10: Attractive Organic Growth Opportunity
Attractive Organic Growth Opportunity Committed capex of £392m into supply constrained market meeting customer needs HQ – Four Office-dominated Near Term Schemes: Soho Square Added, NCC Business Plan to be Optimised Expected Capex £579m To deliver Prospective ERV of £60m, up 12x Committed Capex £350
Slide 11: Flex Performance
Flex Performance Strong leasing driving performance Our Unique Offer; 100% GPE Owned Space; Not WeWork, Not Co-Working Leasing Well: Fully Managed Outperforming Well-located, high-quality buildings operated by trusted owner H1: 12 Flex lettings, £6.4m rent pa Leased by floor/unit (not desk): ‘Fully
Slide 12: Flex Opportunity
Flex Opportunity Targeting growth to 1m sq ft: predominantly Fully Managed Strong Customer Satisfaction and Retention: Key to Success London Market Growing2 GPE Office Fitted Fully Managed • Central London Flex space to exceed 50m sq ft by 2028; 20% office market NPS 44 42 62 • 57% customers will ha
Slide 13: Financial Outlook
Financial Outlook Decline in NTA driven by yield expansion Weighted Average Interest Rate (%) • Potential for selective yield expansion in near term • Best continues to outperform, with further ERV growth expected 6.0% 4.2% 5.2% 3.8% Opportunity to deliver more of the best 4.0% 2.5% 2.7% • £392m com
Slide 14: Agenda
Agenda Introduction Toby Courtauld, Chief Executive Financial Results & Nick Sanderson, Chief Financial & Operating Officer Flex Market Business Update Toby Courtauld, Chief Executive Outlook Q&A ir@gpe.co.uk 14
Slide 15: London Market Conditions
London Market Conditions Macro affecting yields; London leasing fundamentals compelling; best rents rising Main Messages ‘Best vs Rest’2 Near-term macro challenges; central London outperforming UK Rental values (2018=100) Grade A as % of market lettings4 32% • London GVA > UK GDP (1.7% vs 1.4% avg ‘
Slide 16: London Market Conditions
London Market Conditions Vacancy low; prospective supply low; best rents rising Office Vacancy1 ; West End Prime Globally Low New Office Supply to Tighten Further2, 3 24.4% Manhattan Spec Completions (‘23-’26 avg)3 2.7m sq ft p.a. 25.0% 2 New / Pre-Let Take Up (10 yr avg) 5.0m sq ft p.a. Central Lon
Slide 17: London Investment Market Conditions
London Investment Market Conditions Cycle returned; more for sale Cycle has Returned1 Asset Supply up 24% to £5.7bn2 Nom inal Capital Growth (West End and Midtow n) £bn Real Capital Value Index (monthly) 6.0 £5.7bn City West End £4.1bn 400 £4.6bn £0.3bn 2.2 £0.6bn 4.0 £2.1bn 300 2.3 2.0 £1.6bn 3.5 2
Slide 18: London Market Conditions
London Market Conditions Near term, macro uncertainties; medium term, best to outperform Office Rents Yields Near Term Outlook Near Term Outlook Driver May ‘23 Nov ‘23 Driver May ‘23 Nov ‘23 GDP / GVA growth Rental growth Confidence Weight of money Business investment Gilts Employment growth BBB bon
Slide 19: Acquisitions
Acquisitions Market evolving; opportunities increasing Stock Traded Near GPE ‘Fair Value’1 Overpriced 34% >10% • ‘Overpriced’ (>10%) significantly down 74% • ‘Near fair value’ (<10%) radically up 6 months to 36% 6 months to May ’23 Near Fair Nov ’23 • 30% at ‘fair value’; GPE bought circa half c.£52
Slide 20: Significant Capex Programme
Significant Capex Programme Timed to deliver into economic recovery and deep supply shortage Kingsland & Carrington Kent House, 7/15 Gresse St, 33 Alfred Place, Soho Square Estate 2 Aldermanbury Minerva House, Hse, W1 W1 (Flex) W1 (Flex) WC1 (Flex) W1 Sq, EC2 SE1 2 Committed 69% pre-let1 0.4m sq ft
Slide 21: Significant HQ Development Programme
Significant HQ Development Programme All Prime; exemplary sustainability; strong pre-let potential 2 Aldermanbury Square, EC2 Committed French Railways House, SW1 Committed CBRE Cap Rate 5.00% CBRE Cap Rate 4.50% 1 1 Profit on Cost -12.4% Profit on Cost 24.9% Profit to come2 £28.3m/8.5% Profit to co
Slide 22: Where Next For Capital Activity?
Where Next For Capital Activity? Take advantage of re-emerging cycle Capital Activity (£m) Progress Capex Programme • HQ & Flex in core locations – well timed into supply shortage Committed Capex Development & Flex Capex • Healthy demand; rents to rise 200 Acquisitions less Sales1 Grow Flex 180 250.
Slide 23: Opportunity
Opportunity Clear strategy Increasingly interesting market • Focus on central London only; deep knowledge • Short-term macro impacts; adjusting to higher rates • Built on meeting customers’ changing needs • Cycle back; opportunities coming; bifurcation best v rest • HQ & Flex; great potential • Medi
Slide 24: Agenda
Agenda Toby Courtauld, Chief Executive Nick Sanderson, Chief Financial & Operating Officer Dan Nicholson, Executive Director Q&A: Janine Cole, Sustainability & Social Impact Director ir@gpe.co.uk Simon Rowley, Director of Flex Workspaces Marc Wilder, Leasing Director Andrew White, Development Direct
Slide 25: Disclaimer
Disclaimer This presentation contains certain forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materially from any outcomes or results expressed or impli
Slide 26: Appendix: Portfolio and Valuation
Appendix: Portfolio and Valuation 26
Slide 27: Our Portfolio
Our Portfolio1 Significant potential to add value Portfolio by Asset Class by Value Portfolio by Product by Area Committed Ready to Fit Long-Dated Retail Developments 1,724k sq ft £105m £675m 518k sq ft 5% Development Pipeline 12% 20% Prime £280m 29% 24% Flex 2 16% 434k sq ft Opportunity Assets Acti
Slide 28: GPE Portfolio Mix
GPE Portfolio Mix1 At 30 September 2023 By Type (by value) By Location (by value) Residential Midtown 4% 1% Southwark Retail 9% 19% City 12% Noho 40% Office Rest of West End 80% 35% 1. Includes share of Joint Ventures 28
Slide 29: The Valuation
The Valuation Including share of Joint Ventures Movement % Office vs Retail1 To 30 Sep ‘23 £m 6 months 12 months Offices Retail2 North of Oxford St 886.9 (8.0%) (10.1%) Rest of West End 698.7 (4.1%) (7.9%) H2’23 H2’23 (3.0%) Total West End 1,585.6 (6.3%) (9.2%) H1’24 (3.5%) H1’24 (9.6%) (12.4%) Tota
Slide 30: The Valuation
The Valuation1 Drivers of valuation movement % movement Yield shift Rental value movement Residual 6 months -3.3% -8.8% 1.8% 12 months -3.4% -13.4% 3.5% -18.0% -16.0% -14.0% -12.0% -10.0% -8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 1. Including share of Joint Ventures 30
Slide 31: The Valuation
The Valuation Including share of Joint Ventures Initial Yield Equivalent Yield Basis point +/- % % 6 month 12 month North of Oxford Street Offices 3.9% 5.0% 22 50 Retail 2.6% 5.2% 52 60 Rest of West End Offices 2.8% 5.1% 41 73 Retail 3.6% 4.8% 67 79 Total West End 3.4% 5.1% 39 62 City, Midtown and S
Slide 32: The Valuation
The Valuation Including share of Joint Ventures 6 months to Value Sep‘23 Change 12 months £m £m % % North of Oxford St 886.9 (77.3) (8.0%) (10.1%) Rest of West End 698.7 (30.2) (4.1%) (7.9%) Total West End 1,585.6 (107.5) (6.3%) (9.2%) City, Midtown and Southwark 491.1 (91.0) (15.6%) (18.8%) Investm
Slide 33: The Valuation
The Valuation Wholly Owned 6 months to Value Sep ‘23 Change 12 months £m £m % % North of Oxford St 850.1 (72.5) (7.9%) (9.9%) Rest of West End 350.8 (18.3) (4.9%) (9.7%) Total West End 1,200.9 (90.8) (7.0%) (9.8%) City, Midtown and Southwark 392.2 (64.7) (14.2%) (16.8%) Investment portfolio 1,593.1
Slide 34: The Valuation
The Valuation Joint Ventures (100%) 6 months to Value Sep‘23 Change 12 months £m £m % % North of Oxford St 73.6 (9.7) (11.6%) (15.3%) Rest of West End 695.8 (23.9) (3.3%) (6.1%) Total West End 769.4 (33.6) (4.2%) (7.0%) City, Midtown and Southwark 197.8 (52.5) (21.0%) (26.0%) Investment portfolio 96
Slide 35: The Valuation: ERV and Reversionary Potential
The Valuation1 ERV and Reversionary potential Average Office Average Reversionary Movement in ERV Rent Passing Office ERV Potential 6 months To 30 Sep‘23 12 months % £m % £ per sq ft £ per sq ft % North of Oxford St Offices 2.9% 1.1 5.2% 78.05 96.80 15.1% Retail 1.4% 0.2 (0.6%) 7.6% Rest of West End
Slide 36: GPE Leasing Progress
GPE Leasing Progress GPE: Investment Portfolio Lettings1 Lettings, % ahead of ERV2 £m (18.6) (6.0) 7.8 13.3 8.7 4.2 4.5 8 .7 1.5 3.4 5.9 8.4 0.7 7.5 4.1 13.4 30 2009 – HY 2024 Avg +4.2% above ERV 20 10 0 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 HY 24 GPE: Space Under Offer3 Under
Slide 37: GPE Customers
GPE Customers1 By Sector Retailers, hospitality & leisure TMT Professional & Business Services Financial Servcies Corporates Government & Other 100% Government & Other 1% Corporates 18% 75% Financial Services 18% Professional & Business Services 21% 50% TMT 11% Retailers: 25% Head Offices 8% Retaile
Slide 38: Top Customers
Top Customers1 30 September 2023 Customer Sector £m Kohlberg Kravis Roberts Financial Services 4.4 Runway East Professional & Business Services 3.2 Glencore Corporate 3.1 Exane Financial Services 2.8 New Look2 Retailers & Leisure 2.7 Top 10 Richemont2 Retailers & Leisure 2.7 25.5% Fashion Retail Aca
Slide 39: Portfolio Management
Portfolio Management Customer Retention, 12 months to September 20231 Area (000 sq ft) 600 570 500 150 420 400 300 77% 200 100 15% 8% 0 Expiries & Breaks Refurbishment / Sub total Retained Relet / Under offer Remaining Development 1. Joint Ventures at 100% 39
Slide 40: Portfolio Management
Portfolio Management Movement in Reversions1 6 months to 30 Sep 2023 31 March 2023 At beginning of period £9.9m £7.3m Portfolio activity2 £0.2m £1.6m Reversion capture (£0.3m) (£0.2m) Acquisitions and disposals £3.9m - ERV movement £1.2m £1.2m At end of period £14.9m £9.9m 1. Based on let portfolio;
Slide 41: Portfolio Management
Portfolio Management Expiry Profile1 % by total rental income subject to lease expiry or break Years to March Investment Portfolio Near Term Developments 40.0 30.0 0.0 0.0 20.0 4.4 28.8 0.0 10.0 19.8 0.0 12.8 12.6 13.2 8.5 0.0 Six months to 31 2025 2026 2027 2028 After March 2024 1. Includes share o
Slide 42: Portfolio Management
Portfolio Management Void Rate, % by Rental Value1 % by rental value as at 30 September 2023 Investment Portfolio Newly completed developments Development / refurbishment Pre-Let 35 30 2.4 3.3 4.2 7.1 13.1 12.2 3.5 25 10.8 14.5 5.5 15.4 4.7 4.7 5.8 6.4 20 12.9 22.0 14.8 4.3 9.4 15 0.6 19.5 18.3 13.8
Slide 43: Appendix: Financials
Appendix: Financials 43
Slide 44: Balance Sheet
Balance Sheet Proportionally consolidated for Joint Ventures £m Group JVs Total Mar ‘23 Investment property 1,819.1 483.6 2,302.7 2,380.0 Other assets 38.8 2.8 41.6 45.0 Net debt at book value (661.2) 25.3 (635.9) (437.6) Other liabilities (50.0) (11.3) (61.3) (68.8) Net assets and EPRA NTA 1,146.7
Slide 45: Income Statement
Income Statement Proportionally consolidated for Joint Ventures £m Group JVs Total Sep ’22 Rental income 35.0 10.0 45.0 42.1 Fees from joint ventures 0.6 - 0.6 1.5 Property and administration costs (25.3) (1.1) (26.4) (27.2) Development management contracts profit - - - 0.1 Trading property revenue
Slide 46: Income Statement
Income Statement EBITDA proportionally consolidated for Joint Ventures £m Group JVs Total Sep’22 Rental income 35.0 10.0 45.0 42.1 Fees from joint ventures 0.6 - 0.6 1.5 Property and administration costs (25.3) (1.1) (26.4) (27.2) Development management contracts profit - - - 0.1 Trading property re
Slide 47: EPRA Performance Measures
EPRA Performance Measures Measure Sep ‘23 Mar ‘23 EPRA Net Tangible Assets £1,647.1m £1,918.6m EPRA NTA per share 650p 757p EPRA NDV £1,723.5m £2,002.0m EPRA NDV per share 681p 790p EPRA NRV £1,815.1m £2,092.2m EPRA NRV per share 716p 826p EPRA LTV 28.9% 19.8% Sep ‘23 Sep ‘22 EPRA earnings £11.8m £1
Slide 48: Earnings and Dividends
Earnings and Dividends EPRA Earnings Annual EPRA Earnings and Dividend History £m pence 25 Development 22.0 25 Acceleration Inflationary 20.4 20 EPS down: 50% pressures on 17.3 employment, 16.0 19.4 15.8 Retail leasing inc. including 15 12.2 12.7 13.5 provisioning for 11.0 Hanover 20 share-based 10.
Slide 49: LTV and Capital Management
LTV and Capital Management Pro Forma LTV (before value creation) Disciplined Equity Capital Management1 £m £m Uncommitted capex (£358m) Indicative LTV (%) Capital Raised - £310m Committed capex (£392m) with committed capex 166 144 Indicative LTV (%) with 100 200 committed capex and 300 45.0% £300m s
Slide 50: Robust Debt Metrics
Robust Debt Metrics Low-cost debt book Sep ‘23 March ‘23 Net debt excluding JVs (book value £m) 663.3 457.7 Gearing (net debt/net equity) 40.5% 24.0% Total net debt including 638.0 440.0 50% JV cash balances (£m) EPRA loan-to-property value 28.9% 19.8% Today Sep ‘23 March ‘23 Interest cover ratio as
Slide 51: Attractive Liquidity Profile
Attractive Liquidity Profile ESG-linked RCF1 £m Term Loan 500 Debenture Bonds Private Placement Notes 6.1% 2 % Interest rate 400 £250m Unsecured Term Loan • 175bp margin above SONIA • £200m cap @ 6.8% • 2yr extension subject to bank consent 300 6.8% 200 2.2% Capped @ 6.8% 2.8% 100 2.7% 5.6% 2.8% 2.7
Slide 52: Debt Pricing Update
Debt Pricing Update Bond markets and interest rates UK Interest Rates1 Government Bond Yields1 % % 10yr Gilt 6 6 Base Rate 5yr Swap 5 10yr Bund 5 10yr Gilt 4 10yr Treasury 4 3 3 2 2 1 1 0 0 -1 9 0 1 2 3 9 0 1 2 3 18 19 20 21 22 23 18 19 20 21 22 23 -1 -2 -2 -2 -2 -1 -2 -2 -2 -2 p- p- p- p- p- p- p-
Slide 53: Joint Venture Business
Joint Venture Business Contribution to Group % of net assets held in JV Net assets held in JV1 40 Access to new property Risk sharing £132.2m 35 £322.2m 30 25 £46.0m 20 Total £500.4m 15 As % of 30.4% Group net assets 10 Previous joint venture partners 5 0 Mar 14 Mar 15 Mar 16 Mar 17 Mar 18 Mar 19 Ma
Slide 54: Appendix: Flex
Appendix: Flex 54
Slide 55: Our Flex Portfolio
Our Flex Portfolio Proven in numerous buildings and locations: 434,000 sq ft; 105 units GPE Flex: Key Selling Points • Well located, high quality buildings • Self contained • From reputable owner • Thoughtfully designed 5 3 • Sustainably managed • Embedded technology 7/15 Gresse Street 16 1 1 4 3 4
Slide 56: Three Flex Products
Three Flex Products We understand our customers GPE Flex Products Flex Fitted Fully Managed Partnerships GPE delivered; Partnership delivered; What Customers Want by floor /building by desk/room Dedicated, fully furnished space; customised branding ✓ ✓ Flexible agreements; space to grow ✓ ✓ ✓ Sustai
Slide 57: Our Flex Offers: Fitted
Our Flex Offers: Fitted Hassle-free experience; business ready Private floor with your own front door Customer branded, customisable space Desks, chairs & soft furnishings all included Plug and play with a secure internet connection sesame® smart building app and lifestyle concierge service Straight
Slide 58: Our Flex Offers: Fully Managed
Our Flex Offers: Fully Managed All the benefits of Fitted, plus full-service delivery by GPE; all-in-one bill Services include: • community manager and concierge service • food & beverage • cleaning service • maintenance inc. handyman service • planting • waste management • business rates No. of uni
Slide 59: Our Flex Offers: Flex Partnerships
Our Flex Offers: Flex Partnerships By desk and room Leveraging partner infrastructure: • High-intensity, smaller spaces / co-working • Delivers increased amenity; enlivens building • Incubator for future Fitted / Fully Managed customers • Provides customers with expansion / project space Partnership
Slide 60: Growing With Our Flex Customers
Growing With Our Flex Customers Our journey with Synthesia Limited so far… 16 Dufour’s Place, W1 Kent House, W1 • Synthesia is an AI Video generator • Dec 21: Series B fund raised company founded in 2017 • July 22: new lease 3,547 sq ft • From Albert House (The Office Group) • 3-year term, Fully Man
Slide 61: Our Flex Performance
Our Flex Performance How we measure performance Target Lettings 12mths to Sept-23 Calculation Purpose Fitted Managed Fitted Managed Net effective Flex NE rent − Opex Additional rent being generated from 30%+ 50%+ 66% 103% rent beat Ready to Fit NE rent Flex Flex 10yr net cashflow Additional cashflow
Slide 62: Appendix: Market Conditions
Appendix: Market Conditions 62
Slide 63: London Market Conditions
London Market Conditions Macro still weak, but London growing and set to outperform the wider UK Macro softened since May ’231 London set to outperform Sept ‘23: 52.4 PMI Sept 23: Business activity index 70 London Jobs Business Activity 53 3 2 52 1 51 0 50 -1 49 -2 47 -3 50 46 -4 45 -5 44 -6 43 -7 r
Slide 64: London Office Jobs
London Office Jobs London Finance and Business Services employment % p.a. 15% Finance Business Services 10% 5% 0% -5% -10% '09 '10 '11 '12 '12 '13 '14 '15 '15 '16 '17 '18 '18 '19 '20 '21 '21 '22 23 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Source: ONS 64
Slide 65: London Outperforming
London Outperforming Central London rents outperforming global peers inc. Manhattan Global Office Vacancy Rates (%)1 30 27.3 Q4 2019 Q2 2023 24.6 24.6 24.3 23.9 23.3 25 22.6 21.3 21.2 20.9 20.7 20.7 19.1 18.8 20 17.8 16.3 15.7 20.4 20.0 15.6 14.3 14.1 14.0 17.9 13.4 15 17.3 16.5 16.4 11.7 11.6 15.5
Slide 66: London Market Conditions
London Market Conditions New Space Letting at Record Speed1 Investment Market; Pressure on Yields 25% 1200 40 Cost of Debt2 Months to 75% let Let post PC (months) City Prime Yields City Capital Values3 30 1000 20% 20 800 10 15% 0 600 (10) 10% (20) 400 (30) 5% Let pre PC (months) 200 (40) '04 '06 08
Slide 67: London Market Conditions: Active Demand
London Market Conditions Active Demand Occupiers Looking to Increase / Decrease Space by Area1 Active Demand by Sector1 m sq ft Tech & Media Professional Services 30% 7.0 Financial & Bankin g 25% 6.0 5.0 20% Increasing 4.0 44% by area 15% Decreasing 3.0 18% by area 10% 2.0 5% 1.0 0% 0.0 '14 Q4 '15 Q
Slide 68: Central London Active Demand
Central London Active Demand Future Leasing Demand 2023 - 20271 Structural Demand Expansionary Demand 5-year total Potential demand “new normal” 20 44M SQ FT 23M SQ FT 67.7m sq ft (-9%) 61.6m sq ft 18 16 14 12 10 8 6 4 2 0 Banking & Finance, Insurance Creative Industries Professional Business Servic
Slide 69: Occupational Demand by Business Sector
London Market Conditions Occupational Demand by Business Sector1 Banking & Finance Business Services 11% 19% 25% Manufacturing, Industrial & 9% 29% Energy Insurance 10% <10k sq ft >10k sq ft (2.7m sq ft) (6.4m sq ft) Public Sector 19% 7% 22% Professional 2% 19% 5% 5% 4% 4% 6% Consumer Services & Lei
Slide 70: City Active Requirements
City Active Requirements >10,000 sq ft Change Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep 12 1st 6 2nd 6 000 sq ft 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 2020 2020 2021 2021 2022 2022 2023 2023 mths mths mths Professional 838
Slide 71: West End Active Requirements
West End Active Requirements >10,000 sq ft Change Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep 12 1st 6 2nd 6 000 sq ft 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 2020 2020 2021 2021 2022 2022 2023 2023 mths mths mths Professional
Slide 72: City Take-Up
City Take-Up m sq ft Secondhand New Completed Pre-let 10-Year Average 1.3m sq ft 2.5 2.0 1.5 1.0 0.5 0.0 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2018 Q1 2019 Q1 2020 Q1 2021 Q1 2022 Q1 2023 4.9 6.3 5.0 3.8 4.2 6.3 3.8 4.1 5.5 6.4 6.2
Slide 73: West End Take-Up
West End Take-Up m sq ft Secondhand New Completed Pre-let 10-Year Average 1.0m sq ft 1.5 1.0 0.5 0.0 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2018 Q1 2019 Q1 2020 Q1 2021 Q1 2022 Q1 2023 4.4 4.7 4.9 3.6 3.1 4.7 4.3 3.5 4.0 4.4 4.4 3.7
Slide 74: City Office Under Offer
0.0 0.5 1.0 1.5 2.0 Q1 2004 Source: CBRE m sq ft Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009 City Office Under Offer Q1 2010 Q1 2011 Q1 2012 1.4m sq ft Q1 2013 10-year average: Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2018 Q1 2019 Q1 2020 Q1 2021 Q1 2022 Q1 2023 74
Slide 75: West End Office Under Offer
0.0 0.5 1.0 1.5 2.0 2.5 Q1 2004 Source: CBRE m sq ft Q1 2005 Q1 2006 Q1 2007 Q1 2008 1.2m sq ft Q1 2009 10-year average: Q1 2010 Q1 2011 West End Office Under Offer Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2018 Q1 2019 Q1 2020 Q1 2021 Q1 2022 Q1 2023 75
Slide 76: UK Flex Market Conditions
UK Flex Market Conditions1 CBRE Flex customers by sector Proportion of CBRE customer footprint in flex space 0% 5% 10% 15% 20% 25% 30% Currently In two years tim e Infrastructure & Public Enterprise 1% 90% 82% Retail 1% 57% occupiers will have 10%+ footprint 80% Food & Beverage 3% as flex in 2 years
Slide 77: Occupier Controlled Space
0.5 1.0 1.5 2.0 2.5 3.0 3.5 M Sq Ft 1. Savills Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Halved in the West End since April 2021 Apr-21 Occupier Controlled Space1 May-21 Jun-21 City Jul-21 Aug-21 Sep-21 Oct-21 West End Nov-21 Dec-21 Jan-22 Feb-22 Mar-
Slide 78: Central London Vacancy
10.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 2012 Q2 Source: CBRE 2013 Q1 2013 Q4 Central London 2014 Q3 2015 Q2 2016 Q1 2016 Q4 2017 Q3 2018 Q2 2019 Q1 2019 Q4 2020 Q3 Central London Vacancy 2021 Q2 2022 Q1 2022 Q4 2023 Q3 1.7% 7.1% 10.0% 10.0% 0.0% 2.0% 4.0% 6.0% 8.0% 0.0% 2.0% 4.0% 6.0
Slide 79: Annual change in occupied stock, million sq ft
Annual change in occupied stock, million sq ft -10 0 2 4 6 8 -8 -6 -4 -2 CBRE M sq ft 2005 Q3 2006 Q3 2007 Q3 Q3 Net Absorption 2008 Q3 2009 Q3 2010 Q3 2011 Q3 Central London Demand Net Absorption 2012 Q3 2013 Q3 2014 Q3 2015 Q3 Change in occupied stock (LHS) vs Central London Prime Rent Index (RHS)
Slide 80: London Market Conditions: PMA Office Market Balance
London Market Conditions PMA: Office Market Balance1 Months supply West End 100 City Forecast 80 60 Rent falling 40 20 Rent rising 0 '07 '10 '13 '16 '19 '22 '25 1. PMA 80
Slide 81: London Market Conditions
London Market Conditions1 Submarkets diverging; West End fundamentals strong PMA: Office Market Balance PMA: Vacancy Rate Rent falling Months supply Rent rising 1. PMA 81
Slide 82: West End Top Prime Rents
10.0 15.0 20.0 25.0 30.0 35.0 0.0 5.0 Q1 1995 Source: CBRE Months Q1 1996 Q1 1997 Q1 1998 Q1 1999 vs. Rent Free Periods Q1 2000 Q1 2001 Q1 2002 Q1 2003 Q1 2004 Q1 2005 West End Top Prime Rents Q1 2006 Rent Free Periods (LHS) Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Rent (RHS) Q1 2012 Q1 2013 Q1 2014
Slide 83: City Top Prime Rents
10.0 15.0 20.0 25.0 30.0 35.0 0.0 5.0 Q1 1995 Source: CBRE Months Q1 1996 Q1 1997 Q1 1998 Q1 1999 vs. Rent Free Periods Q1 2000 Q1 2001 Q1 2002 City Top Prime Rents Q1 2003 Q1 2004 Q1 2005 Q1 2006 Q1 2007 Rent Free Periods (LHS) Q1 2008 Q1 2009 Q1 2010 Q1 2011 Rent (RHS) Q1 2012 Q1 2013 Q1 2014 Q1 2
Slide 84: Retail
Retail Vacancy falling, retailers active and Zone A rents returning to growth Prime West End Retail Vacancy (% unit count)1 Recent Oxford Street Transactions 16% 14.2% 14% 13.7% 12.9% 12.4% 12.2% 12% 11.3% 11.3% 11.1% 10% 9.4% 9.3% 8% 6.5% Retail: Central London Prime Zone A Rental Growth1 6.1% 6% 5
Slide 85: History of Rental Lags to Yield Moves
History of Rental Lags to Yield Moves West End Prime Yields and Rental Growth Nom inal Prim e Rental Value (LH S) Prime Yields (RHS) £140 7.0% 6.5% 6 qtrs 6.0% £115 2 qtrs 5.5% 1 qtr 3 qtrs 5.0% £90 4.5% 7 qtrs 4.0% £65 5 qtrs 3.5% 3 qtrs 4 qtrs 3.0% £40 2.5% Mar '89 Mar '90 Mar '91 Mar '92 Mar '93
Slide 86: Central London Prime Yields
(%) 3.0 4.0 5.0 6.0 7.0 1986 1987 Source: CBRE 1988 1989 1990 West End 1991 1992 1993 1994 City 1995 1996 1997 1998 1999 2000 Central London Prime Yields 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 86
Slide 87: Equity Demand and Supply
Equity Demand and Supply Central London Investment & Development Property Equity Demand1 £bn X On Market Asset Supply2 Multiple (RHS) 40.0 12.0 8.0 20.0 4. 0 3.5x 0.0 0.0 Nov '10 Nov '11 Nov '12 Nov '13 Nov '14 Nov '15 Nov '16 Nov '17 Nov '18 Nov '19 Nov '20 Nov '21 Nov '22 Nov '23 1. CBRE 2. GPE, a
Slide 88: Equity Demand and Supply
Equity Demand and Supply Central London Investment & Development Property Equity Demand1 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 £bn May Nov May Nov May Nov May Nov May Nov May Nov Nov May Nov May Nov May Nov SE Asia Private 6.5 6.5 9.0 9.0 7.5 14.0 15.5 15.5 14.4 13.7 13.8 14.3 16.3 15.7
Slide 89: Appendix: Sustainability
Appendix: Sustainability 89
Slide 90: Sustainability
Sustainability Progress on EPCs Progress against Net Zero Carbon Roadmap • 100% compliant with ‘23 EPC legislation • On track for 6% reduction in energy intensity (kWh/m2) for • 49% of portfolio compliant with anticipated minimum B rating year end March ‘24 (when compared to previous financial by 20
Slide 91: Sustainability
Sustainability Prime buildings are sustainable buildings: agents’ views Impact of Energy Efficiency Certification on Investment Deal1 Energy Efficiency Impact on Office Space Performance4 BREEAM certificate EPC2 Total Returns 120 Efficient Inefficient Capital values 20.6% 3.7% 100 Yields (NIY) 24bp
Slide 92: Sustainable debt
Sustainable debt £450m ESG Linked RCF Sustainable Finance Framework (SFF) • Issued Jan 20 • First RCF by UK REIT with adjustable margin based on performance against ESG-linked KPIs • Fully available for general corporate purposes • Entire RCF matures in Jan 27 • KPIs aligned with GPE sustainability
Slide 93: Social Impact Strategy
Social Impact Strategy £1.17m social value created YTD, bringing total to £3.57m created towards £10m 2030 target Healthy and inclusive communities Diverse skills / accessible employment opportunities • XLP: £82K fundraised through Community Week • 26 weeks of internships • Volunteering: 1,500 hours
Slide 94: Appendix: Developments
Appendix: Developments 94
Slide 95: HQ: Feeding Ready to Fit Schemes
HQ: Feeding Ready to Fit 7 Schemes On Site/ Existing Completed Medium Existing Targeting New Build1 378,600 sq ft 624,300 sq ft Pipeline Total Near-Term Term 229,700 sq ft 530,000 sq ft 1,154,300 sq ft Capex to come ERV £579m £60m Minerva House, Mount SE1 Royal, W1 New City Court, SE1 Earliest Start
Slide 96: Soho Square, W1
ThisSquare, Soho is a title W1 Best in class HQ redevelopment High quality workspace Roof terrace Next steps: • Improve the design; engaging with Westminster and adjoining owners • Target EPC A, BREAAM ‘Outstanding’ • Vacant possession: November 2024 Garden square aspect • . 96 New entrance
Slide 97: 2 Aldermanbury Square. Steel re-use
2 Aldermanbury Square. Steel re-use 90% of existing steelwork reclaimed 97
Slide 98: Opportunity Rich Capex Opportunity Major Schemes
Opportunity Rich Capex Opportunity 13 Major Schemes Existing New build Earliest Capex Uplift in Next Steps Area area (sq ft)2 Start (£m) ERV (%) 2 Aldermanbury Square, EC2 176,000 322,600 On Site £251m +153% Commence main works 1 Q1’24 French Railways House , SW1 54,700 67,600 £99m +165% Commence de
Slide 99: Development Scheme Review
Development Scheme Review Completions since May 2009 New build area Cost Profit Yield on Rent % let PC sq ft £m1 £m1 cost2 £m pa1, 2 at PC3 BREEAM Rating 184/190 Oxford St, W1 Apr 2011 26,400 28.7 7.1 SOLD SOLD 100% - 23 Newman St, W1 (Residential) Oct 2011 24,900 26.4 0.8 SOLD SOLD n/a Echohomes/Ve
Slide 100: Delivering The Developments
Delivering The Developments Managing construction costs: inflation Average Construction Inflation Index1 Forecast 170 New Fetter Lane 160 33 Margaret St 2 Aldermanbury Sq Forecast at May ‘23 Walmar House 24 Britton St 240 Blackfriars 150 Rd 30 Broadwick St 95 Wigmore St 48 Broadwick St Forecast at N
Slide 101: Our Integrated Team
Our Integrated Team GPE Senior Management Executive Committee Nick Sanderson Janine Cole Carrie Heiss Toby Courtauld Dan Nicholson Chief Financial & Sustainability & Social Human Resources Chief Executive Executive Director Operating Officer Impact Director Director Darren Lennark Andrew White Marc
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