Major development portfolio

In a cyclically quiet period for major development, we have been active in pursuing our existing projects at PaddingtonCentral and West Quay, Southampton, and bringing forward our prospective new scheme in Hammersmith.

At Two Kingdom Street, PaddingtonCentral, we completed the 274,000 sq. ft. net prime office accommodation flagship of this project where we are in partnership with Aviva Investors and Irish-based Avestus. Whilst 75,000 sq. ft. was rapidly let in the spring to Astra Zeneca, interest in the remaining 199,000 sq. ft. has been subdued. At St Bride Street, London EC401, forward-funded by Corpus Sireo and completed in 2010, after a quiet year, 2011 has started well, and we currently have 12,000 sq. ft. office accommodation under offer.

Looking into the future we are now bringing forward, with a view to start in 2011, the detailed design of two office buildings at PaddingtonCentral (Four and Five Kingdom Street02 03). At Hammersmith Grove we hope for a determination of our planning application in March 2011, four months after we completed the purchase of the property. The Hammersmith site accommodates 275,000 sq. ft. net of prime offices in two buildings with the first phase comprising 105,000 sq. ft. net. We intend to build this speculatively on a forward-funded basis.

At Slough, the council will complete its handsome new bus interchange in mid-2011, allowing us to demolish the existing station, so clearing the way for the first phase of this 350,000 sq. ft. office development. Speculative development here is unlikely to be viable in 2011, so we shall be marketing for pre-lets04.

Outside the South East, speculative development of commercial offices will be a rare phenomenon in current markets. Accordingly, our strategy at Cambourne, Cambridge; Curzon Street, Birmingham and Axis Tower, Manchester is to minimise expenditure and wait. All these locations are established, with strong commercial markets and, with very low levels of new product across the board, a return of confidence across the wider economy will induce a recovery of rental growth prospects, the key pre-condition for funding of speculative development. We see Manchester recovering first. It should not be forgotten that Curzon Street is in any event currently in something of a siding, having been identified as the site of Birmingham’s new high-speed rail station. Whilst, for the moment, we are hamstrung by this proposal, the possible location of Birmingham’s HS2 station on this site will of course significantly enhance the location.

Our hotel development at West Quay, Southampton, pre-let to Premier Inn05 and forward-sold to AMEC Pension Fund, is on target to complete in mid-2011.

Turning to new business, we remain active bidders for sites and opportunities in most London locations. On good sites in prime locations, bidding is very competitive, with London exhibiting its enduring attraction as a store of value to the international investor. This often drives down returns to the point when they are too low to attract our capital, which can be invested elsewhere in the UK to deliver the appropriate return for our shareholders.

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Further reading

• Other development and trading activity

Hammersmith GroveLondon View this development

• 01St Bride StreetLondon, EC4
• 02Four Kingdom StreetPaddingtonCentral, London
• 03Five Kingdom StreetPaddingtonCentral, London
• 04Heart of SloughSlough
• 05Premier InnSouthampton