Acquired in July 2015, the 35,526 sq m property is located a short distance from Paseo de la Castellana, which forms the prime office pitch in Madrid. The property will become the Spanish headquarters for WPP Plc. A significant refurbishment of the building is in progress over a period of up to three years with a high environmental certification targeted (BREEAM “Very Good”). A new 17-year lease will be granted on UK standard FRI terms in July 2018, with annual indexation subject to a 1% collar and 3% cap and occupation will take place between December 2018 and March 2019 upon completion of the refurbishment.
In line with our strategy of increasing the allocation to offices in strong locations, we purchased this modern, prime multi-let office in the Western business district of Paris, adjacent to La Défense. This location is set to benefit from enhanced occupier demand and improved connectivity from the Grand Paris infrastructure project. The 23,820 sq m building has a BREEAM ‘Excellent’ certification and is let to strong tenants including Axa, Direct Assurance and Philips.
In June 2018, we exchanged contracts to acquire and forward fund the redevelopment of the Charterhouse Estate (part of the De Beers portfolio since the 1930s) in Farringdon, London for £265m. The Estate is located in an area with a mixture of offices, predominantly occupied by large corporates, restaurants and retail units, and just 150 metres from Farringdon station with connections to the London Underground, Thameslink and Crossrail. The ongoing transformation of the area, driven by the introduction of Crossrail, continues to improve Farringdon’s desirability as an office location.
On completion of the office redevelopment, the Estate will comprise a newly refurbished Grade A office, a warehouse office and 27 residential apartments. It will also become the London HQ for Anglo American and De Beers, a FTSE 100 company. The property will be leased back to the company for 25 years with five yearly fixed reviews.
Germany is experiencing strong occupier demand and take-up, particularly in the main seven cities. In Düsseldorf in particular, healthy employment since 2013 has driven the demand for office space. We have agreed to forward fund this prime office building located on the edge of the Düsseldorf CBD. The completion date is set for mid-2019 and the asset will be built to high specification, providing 15,060 sq m office space and 532 sq m of storage. The building is 33% pre-let on a 15-year lease to Design Offices, which offer office, co-working, conference and event spaces. A long-term rental guarantee of 40 months post-completion has been agreed on the remaining space.
With e-commerce likely to continue to grow, demand for more efficient, modern logistics space is set to continue. The logistics sector in Japan is in high demand with its strong growth and returns potential against little available supply, pushing up rental growth prospects. Such dynamics have led to difficult pricing conditions for acquiring existing assets. In June 2018, M&G Real estate completed the development of its first build-to-core asset in Asia, which is a 55,810 sq m high quality multi-storey logistics building. At the time of writing, our project team is working on a proactive leasing strategy. Encouragingly, a number of preliminary enquiries have been received.