What Do You Do When Brexit Causes Occupiers Of Your £1.7B Development To Waver?
The Royal Albert Dock development is one of the most ambitious conceived in London in the past decade.
Totalling 4.7M SF of offices and homes with a cost of £1.7B, it is of a huge scale. Its location east of Canary Wharf is untested as a business location. And its Chinese developer, Advanced Business Parks, wants it to be a hub for Chinese and Indian businesses, with occupiers buying individual buildings rather than just renting them. That is a proposal not seen before in UK property.
But last week, ABP Chairman Xu Weiping told The Times that Brexit had caused some of the companies that had put down deposits on buildings in the initial £400M, 700K SF phase to consider breaching their contracts rather than making the full payment.
He said uncertainty about Brexit was causing them to go slow on payments. And the delay to Crossrail hasn’t helped either — the scheme has two Crossrail stations within walking distance which will make the scheme far more accessible to workers. His view was that the UK should just get on with it, leave the EU with or without a deal, and end the uncertainty. He said that leaving the EU would increase investment in the UK from China.
Xu explained to Bisnow how the company is managing the situation in the meantime, the “Brexit package” ABP is offering to occupiers, his views on how regulators can help developers at a time of uncertainty, and the company’s commitment to the project.
Bisnow: What is the 'Brexit package' you are offering to potential occupiers?
Xu Weiping: As the developer for the project, we will offer tenants a greater discount, longer rent-free periods and greater amenities to support to any potential occupier.
Bisnow: What could government do to help?
Xu: Our strategy is to urge the government to deliver the Crossrail project as soon as possible and to upgrade this area from Zone 3 to Zone 2. We will also urge the GLA to grant more tax relief to this, the only Enterprise Zone in London.
Bisnow: What rents are ABP achieving at the scheme?
Xu: Currently at £33/SF.
Bisnow: What will the strategy be for the scheme if the UK leaves the EU without a deal?
Xu: ABP remains committed to continuing to increase the competitiveness of the project.
Bisnow: The Times story mentions buyers of the space potentially pulling out of contracts to acquire space. What reasons are they giving for doing this? Are there other factors than Brexit?
Xu: Brexit, especially the uncertainty and the prolonged delay around the negotiations on a deal, is the main reason that some clients are wavering.
Bisnow: Is ABP seeking new buyers for space where buyers are potentially pulling out of contracts?
Xu: ABP is always in talk with clients. No one has pulled out and many of them are waiting for more clarity on Brexit. Regardless the outcome of Brexit, ABP is committed to do our best.
Bisnow: What are the factors that will influence whether ABP decides to invest in future stages of the project?
Xu: We have not given up on Royal Albert Dock — we are not going to pull out as we remain confident in our project, in London and in the UK.
Bisnow: What will be the strategy if it decides not to invest?
Xu: I have not thought about this question as I have no plan not to invest. I believe the UK government and the British people have the wisdom to solve the current problems.
Bisnow: How do you feel personally about political events having a commercial impact on the project? Did you foresee such issues at the start of the project, and how does it make you feel about London and the UK?
Xu: Brexit uncertainty has gone on for more than three years, which no one expected. ABP remains optimistic and confident about the Royal Albert Dock and the UK.