Developers rethink London property schemes

Planned property developments including a 62-storey City skyscraper and two London projects by the Queen’s property company, the Crown Estate, have been called into question by the UK’s vote to leave the EU.

Axa, the French insurance company, said it was “considering all our options” for 22 Bishopsgate, a 1.4m sq ft tower it is due to build with the developers Lipton Rogers in the City of London. A spokesman said: “We remain committed to the site.”

The chief executive of Axa’s real estate investment division said ahead of the vote that it had delayed the development until after the result and would have to “revisit our options” if the UK voted to leave.

Meanwhile the Crown Estate, the property company owned by the sovereign, said on Monday it would review its two outstanding London development plans, a residential and retail redevelopment of a Grade II listed building in the West End and a new 36,000 sq ft office building.

The two projects, Morley House and Duke’s Court, have been granted planning permission but have yet to start construction.

“We will go back and review those. There will not be a substantial change to our long-term strategy,” said Paul Clark, the estate’s chief investment officer.

Like some other property companies, the Crown Estate — which made a record £304.1m for the public finances in the year to the end of March — has already completed much of its development programme in the capital as it anticipated the end of the current property cycle.

However, the UK’s vote to leave the EU casts a shadow over millions of square feet of property planned in the capital during the latest real estate boom.

Some 14.2m sq ft of offices are in the pipeline, the highest level since the start of 2008, according to a Deloitte Real Estate survey in May.

Developers also have plans in place for some 2.5m sq ft of new retail space, according to the property advisers Colliers, and a record number of luxury apartments, according to Arcadis, a consultancy.

Mark Farmer, chief executive of Cast, a real estate consultancy, said most London schemes would at least come under review.

“The centre of the storm is going to be commercial property and speculative residential for sale,” he said.

“Anything that has planning consent that hasn’t been committed, or anything that [has construction ongoing] on site but is a phased project, is in harm’s way at the moment.”

London is expected to be especially affected by Brexit’s impact on demand from occupiers and investors, because of its reliance on global finance and other international businesses.

Analysts at Jefferies, the investment bank, predict 100,000 London jobs at international companies may be transferred to continental Europe. However, Digby Flower, head of London markets at Cushman & Wakefield, noted that office vacancy rates are lower than at the time of either the 2008 crisis or the 1990s recession — one mitigating factor.

The Crown Estate’s chief executive, Alison Nimmo, said: “With last week’s vote to exit the EU, we now expect an extended period of uncertainty and volatility, and that will impact investor sentiment in the property market.

“None of us really know what Brexit is going to look like, but for us as a business, we hope the exit terms will preserve an open and inclusive market.”

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