Shaftesbury Warns Of Rising Office Vacancies In London

Source : The Business Times, February 12, 2009

(LONDON) UK property firm Shaftesbury said yesterday that shops and restaurants in its London portfolio continue to trade well despite the economic downturn, but warned of rising vacancies and falling rents in its offices.

No downturn here: Shaftesbury, which owns about 470 properties in London's West End, said demand from tenants for shops and restaurants remained healthy

'The general economic environment remains challenging and we expect to see an increase in vacancies in the coming months,' Shaftesbury said in an interim statement, adding it believed its West End properties would continue to be in demand.

Shaftesbury's stock price was up 0.7 per cent at 298 pence yesterday morning, while the London market's property stocks sector index was down 1.1 per cent. The FTSE 100 index was up 0.2 per cent.

The company, which owns about 470 properties in London's West End district, said demand from prospective tenants for shops and restaurants remained healthy and it had not seen any fall in the rental values of such spaces.

'This year, the weakness of sterling is bringing more visitors from the euro zone and should also increase the volume of domestic visitors to the West End, as travel to overseas destinations has become relatively more expensive,' it said.

Shaftesbury, which also owns 400,000 square feet of offices and 280 apartments in the upper floors of its properties, said office rentals were now declining, while office vacancies have quadrupled to 36,000 sq ft since the end of September 2008.

As at end-Jan Shaftesbury had a total 67,500 sq ft of vacant shops, restaurants and office space, down from 71,000 sq ft at end-September 2008.

The estimated rental value for the vacant commercial space - including properties under offer and those being refurbished - fell to around £pounds;2.5 million (S$5.52 million) at end-January, from £pounds;3.3 million from four months ago, it said.

Shaftesbury said its bank borrowings at the end of January stood at £pounds;473 million, against committed facilities of £pounds;600 million, while its overall cost of borrowings fell to 5.1 per cent from 6.1 per cent at end-September 2008. -- Reuters