British Land rejected an alternative tenant who would have replaced Meta in a major London lease, instead opting to try to re-let space at higher rents. This shows the landlord’s confidence in the quality of its offices.
British Land reported in September that the Facebook owner had paid £149mn for breaking its lease on a eight-floor building close to Regent’s Park, which it had never occupied.
The FTSE 250 owner on Monday announced that Meta had offered to take over the contract, but British Land took the building back due to the fact that office rents are higher than when the original agreement was signed in 2020 — and they planned to renovate some floors to accommodate the demand for lab space.
Simon Carter, chief executive of British Land, said: “This is British Land reclaiming the building.” “Market rents have risen much more than Meta’s rents,” said “We called it a Win-Win.”
British Land is confident that they can achieve higher rents in the current market by reletting office floors and accommodating life sciences companies, despite the challenges faced by office owners.
Meta has not responded to a comment request.
After the Covid-19 pandemic, companies have shifted to working at home. The office market as a whole has been struggling with falling property values and rising vacancy rates. British Land believes that its portfolio, which includes “campuses”, around Broadgate and Paddington in the City of London will buck this trend. Companies are looking for the best space with the most amenities and environmental credentials.
British Land reported that its office vacancy rates were about 4 percent, which is half of the London average. Tenants have signed leases of 368,000 sq ft over the last six months, at rents that are 7.5 percent higher than valuers estimates.
British Land announced its half-year results for the period ending on Monday. The company said that it expects rents to grow at or above its previously stated range by 2024 in its London office, UK warehouses, and retail parks portfolios.
Carter said that a stronger than expected UK economy and strong demand by tenants in these sectors had improved the outlook. He said that the rental growth has accelerated in our preferred submarkets. Six months ago, we all believed that we would be experiencing a recession. This resilience has helped.”
British Land shares rose 3 percent on Monday, but are still down 17 percent this year.
British Land’s portfolio of £8.7bn declined by 2.5 percent in the six-month period ending September. This is a lower drop than last fall, when rising interest rates continued depressing property values.
Meta, who paid to avoid a further 18 year lease obligation in a cost cutting drive, is still a tenant of a British Land building nearby.