Hammerson has left the (office) building

The developer wants to sell its entire office portfolio in London, worth £548m, to concentrate on retail. But who will buy the assets?

by Emma Haslett
Last Updated: 24 Feb 2012
Got a spare £548m chinking around your piggy bank? Why not check out property developer Hammerson, which today announced it’s planning to sell up its entire London office portfolio to focus on retail. It’s a sign of the times that one of the UK’s largest developers is selling up a (admittedly smallish) chunk of its portfolio. But the company has taken the decision after law firm CMS Cameron McKenna pulled out of a pre-let deal at Principal Place, one of its newest developments.

With the number of shops standing empty at the moment, focusing on retail might seem like a strange decision. But Hammerson clearly knows what it’s doing: the sector makes up 89% of its portfolio, and the majority of its holdings (Brent Cross in North London, stakes in Cabot Circus in Bristol and Birmingham’s Bullring) are shopping centres, which are doing surprisingly well, considering the squeeze on consumer spending. Or, as Hammerson preferred to put it, it’s ‘created a retail business delivering outperformance from prime assets in winning locations.’ Quite.

The plan is to sell off the offices it already owns, all of which are in London - although the company added it will keep the projects it has in development, including Principal Place and London Wall Place, both in the City of London. As for the rest of its portfolio, it reckons it can make more by selling off each property individually - although it say it’s ‘open’ to offers for the whole lot.

Markets clearly liked the plans: shares in Hammerson, which is the UK's third-largest real estate investment trust, with assets worth £5.7bn, rose by 2% immediately after the announcement. As Liberum Capital analyst Alison Watson said, ‘the strategy will allow it to reduce costs, leverage its operating platform and drive income enabling it to grow dividends at a higher rate than in recent years.’

As to who will buy it, though, that’s another question: offices aren’t exactly hot property at the moment, as revealed by a survey out earlier this week. A study by property consultancy EC Harris said that while there are 150 office ‘projects’ in the pipeline ready to deliver 53m square feet of space by 2016, many won’t come to fruition, because the eurozone crisis means that ‘tenants don’t want to commit two or three years in advance'. So a sale will be easier said than done...

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