Helical sees office sector ‘on cusp of change’

The chief executive of developer Helical said the office sector is “on the cusp of considerable change” as the UK emerged from the Covid-19 pandemic. Announcing annual results for the year to 31 March, Gerald Kaye said the company’s rental and capital values had held up well, adding that its portfolio has the necessary focus on sustainability, wellness, technology and amenities to meet changing demands after the coronavirus crisis. “There will be bifurcation in the office sector as the ‘real’ grade-A buildings, which incorporate these facilities and amenities, diverge from the rest in both capital value and rental growth,” Kaye said. “I would expect this pattern to accelerate as tenants seek working environments that match the expectations of their employees.” Helical’s revenue dropped by 13% over the year to £38.6m, its lowest annual revenue since at least the global financial crisis. The company posted a profit after tax of £17.8m, its lowest in eight years. Net asset value was up 1.6% to £608.2m, with the portfolio value dropping from £819.6m a year ago to £740.2m. Helical said that the London office investment market had been more resilient than the leasing market during the past year, as occupiers take a “wait and see” approach before committing to new space. “The change in occupier priorities when considering their office requirements is likely to result in an expedited obsolescence of older buildings,” the company added. “With our strategy of repositioning, refurbishing and redeveloping, we can play a key role in the regeneration of these ‘brown’ spaces, sustainably restoring them to the highest occupational and technological standards and we have a strong track record of achieving this. We will continue to work with existing owners, or new investors seeking to deploy capital into the central London commercial office market and to do this in an equity efficient structure.” ‘Green premium’ on rents Speaking to EG, Kaye said he expects a “green premium and a brown discount” on office rents in future. “There is a lot of opportunity out there to repurpose, refurbish and redevelop the brown and turn it into the green.” Meanwhile, space will likely be reconfigured by tenants as they return to the office, he added, with more flexibility needing to be built in to accommodate hybrid working. “Something that was state of the art 10 years ago now looks dated and tired,” he said. “There is going to be demand for rooms where people can go and do calls, which will create more space.” “Over time desks have got packed together ever more tightly, and while there is now a reversion back to the normal, people will want to have a bit more space around them than they did previously.” To send feedback, e-mail tim.burke@eg.co.uk or tweet @_tim_burke or @EGPropertyNews