London broker upgrades landlord GPE on expected surge in prime office rents
London broker Peel Hunt has upgraded the target share price for West End property giant Great Portland Estates (GPE) as high demand for best-in-class office space is set to push up prices.
GPE’s share price was 342p as of the close on June 11, but Peel Hunt brokers have set a target price of 375p.
Its share price has risen by nearly 30 per cent in the last two months.
Peel Hunt has estimated that around half of GPE’s portfolio is exposed to ‘best-in-class’ prime offices, rent for which are expected to rise six to 10 per cent in the next financial year.
The broker also pointed to GPE’s seven schemes currently under construction as vehicles for strong growth in the future.
“We believe that many of the conditions necessary for a period of attractive growth in central London’s commercial property values are increasingly evident and we are well placed to prosper,” chief executive Toby Courtauld said in GPE’s latest results.
“Given the extreme shortage of such space, London’s growing relative attractions are generating early signs of a reinvigorated investment market,” he added.
Back to office boom
Demand for space has soared as firms increasingly order their employees back to the office.
Financial, London-based firms in particular have been vocal about their desire to get employees back in four or five days a week, with Santander, UBS and Peel Hunt all putting stricter policies in place.
Meanwhile, there is especially high and enduring demand for sustainable, premium quality buildings, so take-up in the first quarter proved to be relatively resilient.
New build vacancy in the City is just 0.6 per cent, and a mere 0.3 per cent in the West End, according to Knight Frank.
“Prime rents [in the West End] have continued their upward trajectory… this is being driven by a combination of resilient demand and constrained availability of high-quality space,” Knight Frank said.