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Brexit uncertainty may hit London office market

Euro and Pound banknotes are seen in front of BREXIT letters in this photo illustration taken on April 28, 2017. (REUTERS)
LONDON: Britain’s largest listed property developer Land Securities warned that Brexit had created business uncertainty in the London office market, leading to falls in demand, rental values and construction commitments.
The developer behind London’s “Walkie Talkie” skyscraper reported a 1.2 percent fall in adjusted diluted net asset value (NAV) — a measure of a developer’s buildings — to 1,417 pence for the year to March 31.
Analysts on average had expected adjusted NAV of 1,372 pence, according to a company-supplied consensus.
“We won’t be sure of the long-term effect of Brexit on our markets for some time....We are taking this time to prepare the business for the opportunities and challenges we see ahead,” Chief Executive Robert Noel said in a statement.
Among the FTSE-100 commercial developers, Land Securities has the largest exposure to UK offices, which could feel an impact as financial firms are considering moving some work out of Britain due to Brexit.
The company said rental values in the London office market were unlikely to grow, unless there was more certainty on the free movement of people and Britain’s terms of trade with the EU.
Land Securities had entered the downturn with limited exposure to development projects that were proceeding without tenants, longer-than-industry average lease lengths on its properties and high occupancy.
On Wednesday, peer British Land forecast persisting uncertainty in the British property market for some considerable time as Brexit talks proceed, even as it noted that London office customers were taking longer to make decisions on moves.
Land Securities said on Thursday it had just 283,000 square feet of available office space developed to let, after turning cautious on speculative development in 2015.
It could decide to exploit 1.4 million square feet of future development opportunities, when the time was right, it added.
In comparison, British Land stayed bullish on such construction for longer and exposure to such projects without tenant releases stands at below 4 percent, but is still worth about £1.7 billion.

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