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British Land rebuffed an alternative tenant to replace Meta on a major London office lease in favour of trying to re-let the space itself at higher rents, underscoring confidence in top-tier offices from one of the UK’s largest landlords.
The Facebook owner paid £149mn to break its lease on an eight-floor building near Regent’s Park that it never occupied, British Land announced in September.
The FTSE 250 landlord on Monday said Meta had offered an alternative tenant to take over the lease, but British Land decided to take the building back because office rents have risen since the original deal was signed in 2021 — and it planned to refit some floors to meet demand for laboratory space.
“This is British Land taking the building back,” said chief executive Simon Carter. “Market rents are now much higher than the rents Meta was paying . . . We called it a win-win.”
The decision reflects British Land’s confidence that it can secure higher rents by re-letting office floors in today’s market and accommodating life science companies, despite challenges facing office owners.
The wider office market has struggled with rising vacancy rates and plunging property values as companies shift to working from home after the Covid-19 pandemic. But British Land expects its portfolio — which includes “campuses” around Broadgate in the City of London and Paddington — will buck the trend as companies look for space with the best amenities and environmental credentials.
British Land said its office vacancy rate was about 4 per cent, half the London average. Tenants signed leases for 368,000 sq ft in the past six months at rents 7.5 per cent higher than valuers’ estimates.
In half-year results on Monday, British Land said it expected rents will grow at the top end of its previously guided range in 2024 across its portfolio of London offices, UK warehouses and out-of-town shopping centres.
Carter said strong demand from tenants in these sectors and a better than expected UK economic picture had boosted the outlook. “The acceleration of rental growth really seems to be coming through across our favoured submarkets,” he said. “Six months ago we all thought we were going to see a recession. That resilience has certainly helped.”
Shares in British Land climbed 5 per cent in early trading on Monday but remain down 16 per cent this year.
British Land reported its £8.7bn portfolio declined 2.5 per value in the six months to September, a smaller drop than last year, as rising interest rates continued to dent property values.
Meta, which paid to escape a further 18-year lease obligation as part of a cost-cutting drive, remains a tenant at a nearby British Land building.