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London Office Landlord Warns City’s Rents Have Further to Fall

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London office landlords should brace for even more damage to their bottom lines.

Great Portland Estates Plc, which owns offices throughout central London, said the worse than expected impact of the pandemic means rents across its properties will likely drop by as much as 10% this year.

The firm suffered a slight dip in office rental values for the six months through September, and a 13% drop in income from the stores that take up the ground floors of most of its buildings, according to a statement Wednesday. It’s warning of even worse to come.

“It is clear that the impact of the Covid crisis will persist for longer than we had hoped and we are engaging extensively with our occupiers and communities, providing assistance where it is most needed,” said Chief Executive Officer Toby Courtauld. “With unemployment rising, albeit from a low level, we should expect rents and capital values in London to fall further.”

London’s office market is in a flux as tenants rethink how much office space they’ll need after the unprecedented work-from-home experiment ushered in by the pandemic. So far, demand for the best buildings is holding up even as vacancy rates on older and lower quality offices rise.

Great Portland wrote down the value of its portfolio by 6.6% to 2.5 billion pounds ($3.3 billion) in the six months, with retail accounting for the bulk of the drop.

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