Great Portland Estates Secures New Leases, Boosting Portfolio Value

Great Portland Estates (GPE), a leading London-focused property investment and development company, has announced a strong leasing performance for the nine months to 31 December 2023. The company signed 43 new leases and renewals, generating an annual rent of £19.5 million, at an average of 11.5% ahead of estimated rental values (ERVs). This robust leasing activity has contributed to GPE's positive outlook for the financial year ending 31 March 2024.

GPE's leasing success is driven by the demand for its office spaces, particularly its Flex office offer, which has seen a 10.4% increase in leasing activity over the nine months to 31 December 2023. This trend is a positive sign for the company's financial performance and growth prospects. The company's portfolio rental value growth guidance for the financial year ending 31 March 2024 remains positive, with a target range of 2.5% to 5.0% (or 3.0% to 8.0% for prime). This guidance is supported by GPE's strong leasing performance, the disrupted investment market, the pipeline of acquisitions and developments, the robust demand for prime office spaces, and the sustainability-led bifurcation.

GPE's Chief Executive, Toby Courtauld, stated, "We are pleased to have maintained our leasing momentum, delivering a strong quarter with £6.1 million of new lettings, bringing the total for the financial year to date to £10.5 million, 7.0% ahead of the valuer’s ERV, with our Fully Managed spaces outperforming once more. With £8.8 million of lettings currently under offer at a 16% premium to ERV, we reaffirm our confidence in our portfolio rental value guidance of +3.0% to +6.0% growth for the financial year."

GPE's strong leasing performance and the resulting rental growth are expected to enhance shareholder returns and be accretive to both EPRA earnings and NTA per share over time. The company is targeting a total accounting return of 10% plus over the near-to-medium term (before yield compression), with additional upside available should property yields contract in a falling interest rate and improving rental growth environment.

In conclusion, Great Portland Estates' strong leasing performance and the resulting rental growth contribute to the company's positive outlook for the financial year ending 31 March 2024. The company's portfolio rental value growth guidance remains positive, supported by its robust leasing activity and the favorable market conditions.