How London office landlords are coping with Brexit’s uncertainty

Developers and landlords are always making bets on what the market will look like in the years ahead, but Brexit is making the office market outlook particularly foggy.

Some of London’s largest office landlords, like Land Securities Group, British Land Co. and Great Portland Estates, are coping with the uncertainty by delaying large-scale projects, minimizing debt exposure and trying to get more out of existing projects, Bloomberg reported.

“Clever management is all about managing those options and being appropriate with risks,” Toby Courtauld, chief executive officer of Great Portland, told Bloomberg. “We are really trying to have our cake and then eat it, whatever happens to the weather outside.”

Complicating matters is the fact that it’s unclear whether the U.K. will end up with a “no-deal Brexit,” which would mean businesses would immediately have to respond to the U.K.’s exit from the European Union. A 21-month transition period is on the table as of now.

For real estate investment trusts, the key question is whether or not to hold off on new projects. Land Securities, the U.K.’s largest REIT, stopped speculative building four years ago. The company will soon need to decide whether or not to start work on three potential new developments.

“I don’t think we will make a decision three weeks before Brexit,” CEO Robert Noel said. “No one knows quite what is going to happen, but we approach Brexit with an appropriate balance of low current risk and exciting future prospects.”

Meanwhile, London’s second-largest REIT has started large projects in the past two years without the guarantee of tenants. Still, the company delayed developing an office building vacated by UBS Group AG in 2016, opting instead to re-lease the building on a short-term basis. [Bloomberg] — Kathryn Brenzel