Whatever the Pet Shops Boys may say about it being a dead-end world, London’s West End is buzzing again. The bad news for retailers campaigning for a return to tax-free shopping for foreign tourists is that shops, restaurants and pubs in the centre are refilling, and rents are rising. While the real high-rollers may be staying away, Piccadilly Circus and Leicester Square’s bubbling crowds are alive with foreign accents that were absent a few years ago.
The revived activity is not confined to consumers. Offices are filling up, squeezing the vacancy rate for prime space down to 1.1 per cent, confounding the other once-received wisdom that the Covid pandemic would doom city centres for ever. In the past four years a generation of school and university leavers has arrived in workplaces to be trained, before they can even think of working from home. Ian Hawksworth, chief executive of Shaftesbury Capital, reports that employees are returning to work for three and even four days a week. That is boosting stores, cafés and pubs, making towns more attractive for a lunchtime shop or after-work drink.
Because there is plenty of mileage left in these recovery stories, it is worth looking at the best ways to take advantage of the trends in the West End, since medieval times the UK’s prime property location. Much of the area’s property is tied up in the private fiefdoms of the Grosvenor, Portman, Howard de Walden and Crown estates. Two stock market property companies bumping up against them are Great Portland Estates (GPE) and Shaftesbury Capital, the latter resulting from a merger last year.
GPE is based in Cavendish Square, blue-plaque territory just behind Oxford Circus and alongside John Lewis’s prime site store. Shaftesbury works from James Street, in the heart of the more raffish Covent Garden. Its property portfolio, valued at £4.8 billion at December 2023, extends to 2.9 million square feet of lettable shops, restaurants, cafés, bars, homes and offices in the Carnaby Street district, Soho and Chinatown. The Tottenham Court Road stop of London’s latest underground service, the Elizabeth Line, has transformed visitor flow.
Although GPE has sites as far east as Canary Wharf and has ventured south of the Thames to London Bridge, predominantly it owns offices and concentrates on Transport for London’s Zone One from Marble Arch to Soho, in particular around the Elizabeth Line. Indeed, it developed the offices that straddle the Bond Street station exit on Hanover Square. It also has the successor building to the former Sunday Times office at 200 Gray’s Inn Road, and owns property in the City of London, now reviving as banks return there from 25-year stays in Canary Wharf.
GPE is treading on Shaftesbury’s toes with the £70 million purchase of a parcel of property facing Oxford Street and Soho Square. The plan is to demolish the existing 57,456 sq ft mixed-use building and turn it into 90,000 sq ft of retail and office space with shops on Oxford Street. GPE likes that end of the street.
Shaftesbury is much more concentrated, with virtually all its assets between Regent Street and Bow Street, and between Oxford Street and the Strand, including most of the Covent Garden Piazza. It is, however, notably absent from the east side of Soho, north of Shaftesbury Avenue.
The two companies offer very different ways of investing in the West End. While GPE is 81 per cent offices by value, Shaftesbury is only 20 per cent in offices, with 68 per cent retail and hospitality and the rest residential. It tends to buy and hold, while GPE is a developer and trader, which makes it hard to pin down what it owns at any one time. As soon as the numbers add up GPE’s chief executive, Toby Courtauld, insists he will sell any investment, including the splendid Hanover Square development, which many rivals would be tempted to keep as a showpiece. His strategy, reasonably enough, is to buy when values are low, as now, and sell high. To that end, in May GPE raised £350 million of firepower through a three-for-five rights issue, a chunky addition to a group valued at £1.35 billion.
Those contrasting styles are reflected in the companies’ share prices. While Shaftesbury has risen quite smoothly from 102p to 150p since last November, GPE has spent the last year dancing around 350p, a long way from the 800p it hit on the pandemic’s eve. You could argue that GPE is the more entrepreneurial of the two, and certainly the more opportunistic. To that extent it is more dependent on Courtauld’s continued presence but, after 22 years, he is still only 52 and shows no sign of flagging. On the other hand, if Hawksworth stepped down at Shaftesbury, it feels as if the show would continue with barely a blink.
There is an outside possibility that the two companies could be brought together, as Norges Bank Investment Management, acting for the Norwegian Government Pension Fund Global, owns 25.2 per cent of Shaftesbury and 12.05 per cent of GPE, easily its two biggest percentage holdings in a wide portfolio of listed UK real estate. The Norwegians do not have a history of playing marriage broker, but it is actively buying into these two.
Shaftesbury’s latest earnings per share were 3.7p, mostly paid out in a 3.15p dividend for a 2.1 per cent yield at the current share price, where the price-earnings ratio is 40.5. Analysts at Peel Hunt see the p/e falling neatly to 26 in respect of 2026, with the yield growing to 3.6 per cent. GPE’s prospective p/e ratio is 33 for 2026, and analysts reckon its existing 3.6 yield will stay that way for the next two or three years. That of course will be a growing attraction as interest rates continue the fall initiated by the Bank of England last week. And cheaper borrowing is always a tonic for the property sector.
ADVICE Buy GPE and ShaftesburyWHY Looks like we are not far past the low point in the West End property cycle