The worsening outlook for London commercial office lettings has encouraged property developer Hammerson to hang the “for sale” sign over £500 million of its commercial office portfolio.
Hammerson currently owns a range of commercial office property in the City and West End of London, amounting to about 10 per cent of its £5.7 billion portfolio.
The properties for sale on the block in the City are 10 Gresham Street, 1 Leadenhall Court, 125 Old Broad Street and 99 Bishopsgate. In the West End, Victoria’s Stockley House and 10 Grosvenor Street-its own headquarters are also being sold.
The developer will now focus on pumping cash into a host of commercial property retail assets and adding to the range of commercial property outlets it already owns, such as London’s Brent Cross commercial property shopping centre, Cabot Circus in Bristol and The Bullring in Birmingham.
It also owns commercial property retail centres in France and is currently building a major commercial property shopping and leisure complex in Marseille, which is due to open in 2014.
David Atkins, Chief Executive denied the decision was a hasty reaction to the fading London commercial office market. He said: “It is really setting the direction of the company over the next few years.”
Harm Meijer, JP Morgan’s property analyst hailed the move: “This improves the company’s investment focus (to retail) and we regard Hammerson’s management as one of the best retail managers in the sector.” Hammerson shares climbed 4.0 per cent to 400p.
Hammerson will sell its existing commercial offices in London, but will hold on to developments that are in the pipeline, such as Bishopsgate Goods Yard, London Wall Place and Principal Place near Liverpool St station. Hammerson recently failed to lease these, to law firm CMS Cameron McKenna.
The company believes it can possibly get more cash from selling its commercial office buildings individually, although it is open to selling them as a package. At the same time, Hammerson plans to focus solely on retail in the UK and France and did not rule out entering other European countries. It is expected to boost returns in the years ahead.
Atkins said: “Following the review of our strategy we will focus on being the best owner-manager and developer of retail property within Europe. We now intend to sell our standing office investments over the medium term to maximise returns, redeploying capital into the retail sector to exploit our expertise and build on our existing scale.”
Hammerson is also exploring a deal to buy a stake in Meadowhall commercial property shopping centre in Sheffield. Atkins said, the FTSE 100 property company has “had a look and continues to look” at a deal for the £1.6bn Sheffield commercial property shopping centre. He added: “We are in the market and that is on our doorstep.”
Meanwhile, another city scheme, the £800m Pinnacle, has come to a standstill again as the developer, Arab Investments, failed to secure a pre-let, a vital condition to gaining additional funding from its lenders, which include HSBC. Property consultancy EC Harris has warned that 150 planned commercial office projects in London are in danger from the Eurozone crisis.