Landlord of London’s Crippled West-End Fears Winter, Virus
Landlord of London’s Crippled West End Fears Winter, Second Wave
(Bloomberg) -- As the glitzy stores and dining spots of London’s West End start stirring back to life, one of the area’s biggest landlords says tenants are still struggling to pay their rents.
The Crown Estate, the 13.4 billion-pound ($17.4 billion) property firm that helps pay for Britain’s monarchy, says customers are only slowly returning to the West End’s shops and restaurants as they reopen after lockdown. Now the landlord, which owns swathes of the city’s shopping and entertainment district, is bracing for a further financial blow as a potentially brutal winter and new spike in virus cases looms.
“We are under no illusions about the challenge ahead,” Dan Labbad, chief executive officer of the Crown Estate, said in a media briefing. “We do expect our financial performance to be significantly down in the next financial year.”
The value of the landlord’s holdings fell by 1.2% in the 12 months through March, driven by writedowns of properties outside London, the company said in a statement Friday. It made a revenue profit of 345 million pounds in the 12 months through March that will be returned to the U.K. Treasury, which in turn will determine a percentage to fund the royal family.
That figure is likely to be significantly lower next year, as companies struggle to pay the rent and property values fall. About 68% of the rent due to the Crown Estate in March has so far been paid, and the landlord is on track to collect a similar proportion for the quarter that began in June.
The owner of much of London’s iconic Regent Street shopping strip was already facing an ailing retail market before the virus arrived. Previously bustling centers in the capital have been starved of people as office workers and international tourists stay home. That’s prompted the U.K. government and large companies to urge employees to return to the office, even as the number of infections has begun to rise sharply.
“At the moment, the West End is slowly filling up again,” said Labbad. Businesses are “showing a lot of grit -- resilience is a key element. The next few months are going to be key, going into the colder weather and what happens from a health perspective.”
Companies leased about 1.1 million square feet of office space in the West End in the year through August, down 64% on a year earlier, according to research published by broker Savills Plc. That’s lifted the vacancy rate to 4.9%.
The Crown will pay its profits to the Treasury in stages this year, rather than as a lump sum, according to the statement. That’s to ensure it can cover its costs given lower rents and rules that restrict it from using its capital account to cover operating expenses.
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