Songbird, the majority owner of Canary Wharf, has dismissed worries of a property bubble in London after strong demand drove a fivefold increase in full-year profits to £1.04bn.
Sir George Iacobescu, chairman and chief executive of Canary Wharf Group, said the fears were overblown because the capital needed 50,000 new homes a year and only around 30,000 were being built.
“And if there is a bubble, the market will find its level,” he added.
This week the Bank of England’s Financial Policy Committee raised concerns about “emerging vulnerabilities" in the housing market and Lord Turner, the former head of the City regulator, warned Britain's property obsession had left the country at risk of another major financial shock.
However, Sir George was confident about the prospects for the London property market and the company, which recently decided to move from office and retail developments into residential property. Earlier this month, Canary Wharf won planning permission its first ever residential building – a 58-storey tower called Newfoundland.
David Pritchard, the chairman of Songbird, said: “Improving market conditions resulted in a sharp rise in the valuation of the investment and development portfolio.
“This rise reflected a robust leasing performance across the group’s office and retail space and an impact from the strategic decision to pursue residential development.”
The value of the Songbird portfolio rose 14.9pc to £6,571.5m over the year to the end of December, boosted by investors looking for higher returns at a time when interest rates have been held at record lows.
Occupancy levels rose to around 97pc last year – the highest since the start of the financial crisis – and have crept above 98pc in the first few months of this year, Songbird said.
Adjusted net asset value (NAV) rose 38.1pc year-on-year, pushing the shares up nearly 16pc on Friday.
Analysts at Peel Hunt said in a note that the rise in NAV was unexpectedly large: “Songbird is now the cheapest stock in the sector, trading on a 33pc NAV discount. Today’s result also provides a strong read-across for British Land’s large City office portfolio."
JP Morgan called the results “outstanding” and said it expected developments to “continue to deliver” with Wood Wharf – a mixed office, retail and residential development next to Canary Wharf – and the Shell Centre on London’s South Bank.
Mr Pritchard said the company's pipeline of new developments meant it was well positioned to take advantage of increasing demand and the prospect of a "shortfall in supply of both prime commercial and residential space".
He expected a decision on the Shell Centre in around two months' time and a decision on planning permission for Wood Wharf by the summer 2014.
The scheme had been approved by Lambeth Council and construction was due to have began last year but the Department for Communities and Local Government controversially called for review to consider issues including the impact on views of the Palace of Westminster, a Unesco World Heritage site.
The proposed project would see the wings of the Shell Centre, which sits across the Thames from the Houses of Parliament, demolished to make way for eight new buildings with shops and offices and 877 homes. The 27-storey Shell Tower, built in the 1950s, would remain but would be dwarfed by one of the new buildings that would reach 37 storeys.
Crossrail station at Canary Wharf
Songbird said more that 70pc of the 115,000 sq.ft retail space above the Crossrail station at Canary Wharf is already prelet or with solicitors. It will include an Everyman cinema, psycle, which according to its website offers "a high intensity, low impact, head to toe workout on a bike", Big Easy, The Breakfast Club, poncho 8 and sticksnsushi.
The shops will start to open from next year, around three years ahead of the opening of Crossrail.
source: telegraph.co.uk
Publisher: telegraph.co.uk
