Great Portland Estates Plc (GPE) Earnings Call Transcript & Summary

What a complete privilege and pleasure it is to do this really rather virtually. I hope you guys all found that valuable and you got to see some of our most recent most cherished products. So we're really pleased to have been able to show it to you. And as I say, I hope you enjoyed it. And can I -- a special thank you again to Stevie and his team for making it all happen. I think he or she upstairs looking down upon us perhaps didn't hold the rain off as we'd hope, but maybe they saw it as a branding opportunity because 100 people walking around the West End with a Hanover Square umbrella is not a bad thing to be able to do, especially when you go down Shaftesbury Carnaby Street. There we go. So thank you also to all the people who helped with the guiding, and I hope you had your questions answered. And if you've still got some stamina renewed after we've given you 75-or-so minutes of great storytelling, there's an even greater lunch to come. So any questions you've got, we'll try and wrap them up after this session and if not, in this session then over lunch. Now I think that this is one of the most exciting times to be in real estate. This team at GPE has many tens of years of accumulated knowledge and talent. And if you look at the times that we've spent together, I really do think this is one of the most interesting times we've experienced. It's full of challenge. It's full of trends and changing trends that we're going to touch on today. But it's also consequently full of opportunity. And that's what makes it so interesting. And one of the greatest changes that we're experiencing is in the way that our customers and their needs are changing and the behaviors that they are showing and that they expect from their property owners is changing, too. And that has significant implications, we think, for real estate. And we're going to talk about that at length. But it's also clear that this is a time of a great deal of uncertainty. But the best businesses use uncertainty to their advantage. They are the businesses that see change coming, and they evolve in the face of that change and they evolve quickly. And today is all about the way in which we're evolving and the way in which we're setting ourselves up to win in this new set of challenges ahead of us. And everything that we do when we think about how we're going to win comes back to our customer, putting their needs right at the very center of everything that we're thinking about, and we call this customer first. And that's the essence and the theme of today. So let's dig into it. What are we going to talk about? So our collective team of experts are going to, over the next 75-or-so minutes, take you through some of the stories. We're going to start with Dan, our most recent appointment to the Board as an Executive Director. Dan is going to give you an overview of the portfolio and how it sits today relative to some of the themes we're going to talk about. Steven will then take up the story from there and give a little more around our flex proposition. You've obviously seen Dufour's today. It's a crucial part of our strategy, and you need to understand what it is that we're doing in that space. When -- whereupon Simon will look at how we have leased in that space and some of the challenges ahead and the market conditions that we're trading into. We'll then come back to Dan. Andy White would have taken this slot. He unfortunately has been gotten by this small disease beginning with C. So he's not here today. We didn't think it'd be appropriate even though he'd be allowed to be here today to put amongst you. We didn't think that was responsible. So Dan will step in and will talk to you about our HQ repositioning before Janine will touch on sustainability and look at some of the challenges ahead there because we think there's a huge opportunity for differentiation that you've heard us talk about before. Nick will then bring all of those strands together and think about how this might change the prospective returns that we have to offer our shareholders and our stakeholders more broadly before we wrap up with some conclusions and Q&A from me. However, before all of that, we ought to just talk about London because it is very clear to us that London's position as a dominant global center of commerce, we think, remains intact. We think recovery is building. And we think if you look at various measures, you see that, number one, positive economic prospects. If you look at the prospective GVA growth as a proxy for GDP growth, it's still ahead of the U.K. It's less than it was, mind you. COVID has clearly taken a big chunk out of that and even less than it was 6 months ago largely because of what's going on in the Ukraine. But nonetheless, it's still positive, and it is still better than the U.K. overall. And if you look at PMI indices and you look at intentions, they have come back. They're certainly going to continue to be volatile, but they're still north of 50 and still, therefore, suggesting that there is growth to come. And you can see that in employment growth. And in fact, various people commentating on this subject would suggest that employment growth is already back to where it was pre-COVID. I touched on uncertainty. Inflation is clearly one of them. The full impact of the conflict in Ukraine remains unknown, and we need to keep an eye open very clearly around both of those topics. But longer term, London's fundamentals, we think, remain very strong. Its breadth and depth of the economic offer are world-beating. It has, in many ways, characterized itself as one of the world's very best mixed-use locations. It has everything you could possibly want to do within a few hundred yards of this space here. It has new industries that are growing quickly, tech clearly one of the biggest employers recently. Life sciences, it's everywhere at the moment, certainly in our space, looking for space. We think retail has probably turned the corner. We said that in November with our results last year. Footfall is not back to where it was, but it's certainly recovering. And by the evidence of recent deals that we've done in the retail space, we can show you rental progression. And of course, Crossrail, the Elizabeth line, opens this year from June. And it's right there. So it could not be closer to buildings like this, and it will get you from there to Heathrow in about 27 minutes. So it's a game changer in many ways. And all of the buildings that we've shown you this morning are positively impacted by it. So the backdrop for London, we think, is pretty strong. And if you look at what we have said this morning around leasing, you'll see that those themes resonate strongly here, too. In fact, we've just delivered a record leasing year. Who would have thought that in a period coming out of COVID, we would have done more pounds rent than ever before, nearly GBP 40 million, more than 0.5 million feet, almost 10% ahead of what the values were telling us we should be getting for that space. And even in the most recent quarter, with all of the noise and all of the issues going on in the east from here, we're still leasing and we're still leasing ahead of ERV, 8.1% ahead most recently and with GBP 31 million worth of deals in negotiation at the moment. So some really strong themes beginning to emerge that we'll touch on more as this conversation goes on. Where is that demand? Two areas principally forming the themes that we're going to touch on: one, prime spaces, the best that people can get; and two, flex spaces. Retail, as I say, has also turned the corner. Now as we think about London and we think about our customer, we're starting from actually a very strong place, our Net Promoter Score almost 28; industry average, 2. So we're obviously doing something right when we think about customers, and that's where we're going to turn now. So over the page, please. Thank you very much, [ Rich ]. And I think the best place to start as we think about customers is strategy. Their needs are evolving, and thus, our strategy around their needs must also evolve. And we are. It's responding very well. You'll recognize top left, we talk about it a lot with you guys. The key themes that have defined our strategy for years, Central London 100% with a West End focus, repositioning of real estate, matching our risk to cycles, low leverage, et cetera. We've added 2 new ones that define who we are. Sustainability. We talked about it at the CMD 2 years ago. It's an absolute economic imperative. It remains as such. And we've added lastly a differentiation of our product based around flexibility, based around service and based around technology. And with those in the back of your head, remember, we're delivering returns long term ahead of our markets, and you can see that by the TPR numbers there. And that's because we broadly got our cycle read right. That's going to be more difficult from here. It's been more difficult since Brexit. So we are doing other things to make a return for our stakeholders. Bottom left, the themes we talked about 2 years ago. London, just touched on that. Changing working patterns, this is pre the pandemic. We were already identifying the working patterns within firms who are customers of ours were changing. We'd already identified technology as a big differentiator. And clearly, the climate change debate was speeding up very aggressively a couple of years ago, and we were strong on that, too. If you were to bring all of that together, we think actually, it all adds up to a customer-first approach. So when we think about customer first, what do we mean? Well, those of you who were paying attention in our November presentation last year or indeed 2 years ago at our CMD will have seen this list. These, we think, are the principal themes that go to define what our customers are needing. So we need to hit them all, and we need to be hitting them all every day, all day. Let's start with quality. There's no question that customers are demanding the best they can get. Rent as a proportion of overhead cost in Central London is somewhere around 8%, right? So by and large, our customers can afford the best spaces, and we should be prepared to offer them the best spaces in return. They're looking for flexibility. We've seen that this morning. Choice is valuable. They're certainly looking for high sustainability scores. It positively impacts their brand. It enables them to attract talent. They're looking for better levels of service. Enhancing service to them, by us, enhances their own experiences and allows them to retain the talent. They're looking for health and well-being. You hear it all the time. You will experience this in your own buildings. Where is that space that you can go relax, that you can go and do some exercise in? How does it make you feel? It's more domestic in nature than it once was. It needs to be inclusive. It needs to be accessible. It is a real differentiator if done well. Technology is needed. It's an enabler. It's an enabler for the customer in their experience of the building, not just in the way they interact with it but also in the way that we future-proof our buildings for these changing and tomorrow's working patterns. And lastly, the social dimension has become something that is resonating across our customer spaces today. We need for them to feel and for them to actually create a lasting and a positive impact in the communities within which we operate, and it's something that we give a lot of time to. Bring all of those together, bring all of those themes together, and companies that do that well have in their hands a massive differentiator, we think. Better customer outturns will lead to better returns for us and our stakeholders. Now let me just wrap up this section by talking to you first about what does all of that mean for the business that we have today? Well, we think there are 2 very complementary and very overlapping business streams within GPE. We call them HQ repositioning. Think of Hanover Square. Think of this building, larger, absolute best-in-class spaces. And then flex and all of the components that go within flex. Think of Dufour's Place, and we'll hear more about that in a minute. Both of these streams have large amounts of prospective growth already organically within GPE. HQ repositioning, GBP 1.1 billion near-term program already started. And in the case of flex, we think we can take ourselves from circa 250,000 feet to about 600,000 feet just through organic conversions within our existing portfolio. But we also need to change the way we talk about these spaces. You used to hear us talk about Cat A and flex in its broader sense, with Flex+ as our service overlay. And then we had a series of partnerships. From now on, we will talk about them as ready to fit, fitted and fully managed. So the whole lexicon of what we're doing is designed with the customer thinking at the very center, and it's all about what it is that they want from us. So on the left, you've got products that we deliver ourselves, buildings or by floor. And we also still have our partnerships on the right. And you may have seen this morning the announcement of our new partnership with Runway East, an existing partner of ours down at The Hickman, where we provide spaces that are by the desk or by the room, but where we're using their skills to help us deliver that. So that's the spread of how we are going to run this business from here. What we're now going to do is hand over to Dan to see how the business and the portfolio is shaped up to address that.

Great. Thank you, Toby. Good morning, everybody. My name is Dan Nicholson. I've been working at GPE since October. And my primary role is to oversee our portfolio and development management businesses. As you've heard from Toby, our portfolio is very well suited to our 2 complementary activities of HQ repositioning and flex proposition with the customer completely at its heart. And so the question you got to ask yourself, where is the raw material for each of these business lines going to come from? We may recognize the chart on the left, which divides up our portfolio by value. The gray area, that's our long-dated asset, which predominantly consists of our completed developments which are traditionally let on long leases. The blue piece is our active portfolio. It's about GBP 1.5 billion. And traditionally, this would have been let on normal leases of around 5 to 10 years at normal market rents and little in the way of service provision. And the vast majority of our flex activity is going to sit in this blue piece. However, as Toby has just said to you, we're going to be approaching our business in our real estate in a different way and putting the customers firmly at the center of what we do. And more on that from Steven in a minute as he talks about flex. And the remainder of the pie chart there, the green part, that's our on-site developments and our pipeline, the former of which consists of 50 Finsbury Square, of which the offices are completely pre-let to Inmarsat. And so this piece, the green and the little dark green, that's 24% of the portfolio with the pipeline itself consisting of 7 properties, of which the first is to start on site later this year and more of that in a minute. Okay. So turning to the other business we talked about, which is flex. The pie chart on the right breaks down our portfolio in a slightly different way, and that is by area and into different categories. And that is by the products which Toby talked about at the end of his speech there. And as you can see, flex currently comprises 11% of that, with the remainder being made up by retail at 20% and our ready to fit at 69%. And in line with our strategy which we've outlined, our ambition is to significantly grow flex and the proportion of flex that comprises of that piece over the coming years. Let's have a quick, closer look at the green development pipeline and the huge opportunity that this presents for our HQ repositioning business. So for the first time in a very long time, a huge amount of our development pipeline is very near term, as you can see from the slide. The first project, 2 Aldermanbury Square, that's due to start this year. The demolition is already underway. If you happen to be in the area, again, take a look. The tower crane is up, which for some of us is very exciting. And from these near-term schemes, there's a huge area again, and we're going to be taking it from what is now existing buildings and doubling it to 916,000 square feet in total from those schemes. And these involve a capital investment of about GBP 828 million and deliver GBP 72 million total of ERV. And that, in floor area returns, is an increase of 118% over the existing buildings, which we're replacing. So beyond this, in the medium term, we've got 3 projects, which have about 200,000 square feet of existing area, and these are all in a much earlier stage of their process towards their eventual redevelopment. But as with the near-term schemes, we're still intending to increase the floor area by a factor effectively of 2x. And I'll cover some of these off later as well as showing you some pretty pictures of what they're going to look like. And in total, the development pipeline could deliver 1.1 million square feet of new space over the coming decade. So turning now to look at flex. Here's a repeat of the pie chart you saw earlier with the split of our portfolio into those different products. And why -- we have to ask why is our portfolio so well suited to flex? Well, there are several aspects to it. Firstly, 87% of our office suites are sub-10,000 square feet, which is exactly at the moment where we see the demand for flex line so that size-wise, they're perfect. And there are a couple of other elements, too, which really work for us. They're located in clusters, around which you can relocate occupiers as they grow between your various buildings. You'll have heard some of us talking about that this morning over at Dufour's. In addition, this clustering also aids service provision because it's really facilitated by physical proximity. In addition to this, our buildings have very flexible layouts and that's great. You saw at Dufour's. And these provide amenity space, which is absolutely critical for our customers and attractive for them and helps us get them into the building. So our strategy here is to increase this element by converting our space wherever possible, adding fit-out and customer service provision into the properties. And that -- the service provision is that element for which we get paid that incremental rental margin. And basically, if the properties don't suit our HQ repositioning business or flex, what we're going to do is going to maximize the value and exit them. So we're getting clear business plans drawn up and executed to achieve that. So roll the clock forward, what does the future of our portfolio look like? Well, pie chart at the bottom, by 2027, we show that prime has grown to 42% of the portfolio, and that's predominantly because we've delivered all those developments we talked about in the pipeline. And in line with our strategy, flex has now grown to 20% of the portfolio with the greatest increase coming in the fully managed space. And that's, as I said, where we get the most incremental rental margin. In addition, the retail element is now down to 18%. So how are we going to do this? How are we going to get to these statistics? Well, we've restructured our team to facilitate this. And Steven, from whom you'll hear a little more in a minute, he's taken up the flex leadership to drive that business forward. And we've also appointed design, procurement, acquisition and leasing specialists to deliver our customer-focused offering. And the whole culture of customer service is being accentuated across the entire GPE business going forward. So as you can see, from all of this, our flex business is absolutely primed for future growth. And here's Steven to talk you through some of the details of how we're going to realize those ambitions.

Thanks, Dan. Good morning, everyone. I'm here in my new role, where I'm focused on developing our customer-first program and leading our flex activities. This morning, I want to tell you more about our flex business and the significant ambition we have for this. The real estate market is evolving with customers buying and occupying their workspace differently. And we're evolving too, working even harder to put the customer at the center of everything we do. Our vision is clear: We want to create great spaces that are flexible, sustainable and beautifully designed with the customer at its heart, offering high-quality service that delivers an enticing workspace experience. Before telling you about putting that vision into practice, I want to provide some market context. The flex market is growing, driven by a need for greater flexibility, greater experience and greater ease of doing business. As you can see from the chart, the market has seen significant growth since 2007. And we're also seeing flex fast becoming the standard for sub-10,000 square foot floors. Growth is set to continue with more demand than ever. The market is forecast to achieve double-digit growth, with flex making up 15% of office stock by 2026, up from around 6% today. Critically, key drivers are accelerating. Business wants more agility. People want more choice. And technology is playing its part as we steer away from the old, normal ways of working. This all points to the customer base growing. Flexible workspaces are no longer just for small and medium-sized businesses. Flex is increasingly being used as a key part of corporate real estate strategies, with just over half currently planning to increase access to these spaces. And by 2030, JLL believes 30% of all office space will be consumed flexibly. Leasing agents are handling increasing demand for larger spaces, with Savills reporting a tangible increase in 50-plus desk requirements. And the supply of larger, quality flex spaces is struggling to meet this demand in many Central London markets. So there's a real opportunity to deliver our products into this growing market. We understand our customers. We meet them regularly. And our voice of the customer surveys provide insight. So we are well placed to match our products to what they want. We have 3 flex products: fitted, fully managed and our flex partnerships. First, our fitted offer, which delivers a hassle-free experience with space ready for business. We're delivering private workspaces with their own front door, let by the floor, not by the desk. And with this comes security and the opportunity to customize and brand the office. Spaces are delivered fully fitted with meeting rooms, dedicated kitchen, furniture and secure Internet. There's also access to our award-winning app, sesame. We've got a simple agreement to sign and no third-party managing agent so customers deal directly with us. And with a portfolio of some 2 million square feet, there's plenty of room to grow while staying within the GPE family. We now have 29 fitted units across London. These have been leased for a term similar to traditional leasing and at a healthy rental premium to ready to fit, reflecting the advantage of being able to walk in and start operating. Our second product is fully managed. This delivers all the benefits of our fitted spaces plus a full-service delivery in one monthly bill. Customers no longer need to worry about putting in place multiple contracts to run their office. We'll even change the coffee beans and put milk in the fridge. So far, we've created 25 units, leasing at an average rent of almost GBP 180 a square foot, a significant rental premium. And then there's our third offer, flex partnerships. Here, spaces are sold on a fully serviced basis typically by the desk and room, not by the floor. To deliver this, we're leveraging our partners' infrastructure to manage these more operationally intensive smaller occupiers who often sign up for 1 to 10 desks. These partnerships bring increased amenity and energy to our buildings and provide incubator space for fast-growing businesses. There's also the opportunity for our corporate occupiers on longer-term fixed leases to expand or take project space. Our partnership agreements are not passive. Unlike a traditional lease at a market rent, we align ourselves with the center's success, giving us the opportunity to outperform. To date, we've put our partnerships in place ahead of development block dates, maximizing cash flow over a limited time period. And we've now signed our first long-term agreement with Runway East at The Hickman, which moves us on from income protection to value enhancement. By marrying this with our other flex products, we're creating a truly flexible building. We're growing our track record and reputation in the flex marketplace. We've also been developing our products and learned valuable lessons over the last 4 years. Two key learnings: First, we're experiencing limited risk when compared to our traditional leasing model. Lease terms are not materially shorter than ready to fit and space is leasing much quicker. We're also accessing customers that would not have previously considered GPE. Our spaces are appealing to those graduating out of serviced offices as well as more mature businesses looking for a greater workplace experience. Second, whilst leasing and operating fully managed may be more operationally intensive, strong returns justify the effort. The table, top right, provides a summary of the accretive returns for deals over the last 12 months when compared to leasing on a traditional, ready-to-fit basis. And as you can see, we're beating our targets. To illustrate, let us look at the numbers for Dufour's Place, which we saw this morning and where we're generating further growth. Let me walk you through this chart. Having refurbished the building last year, we could have traditionally leased the space at GBP 75 per square foot or a GBP 60 net effective rent. We chose fully managed and have leased this at an average GBP 195 per square foot, which nets down after service costs and a small rent free to GBP 105, a 75% rental premium when compared to the ready-to-fit alternative. You'll be hearing from Simon shortly with more on the latest deal in Dufour's at GBP 230, signaling more upside to come. And we also see further upside to come from across the portfolio. GPE has always had a strong record of customer retention. But with a new focus on experience, we anticipate stronger retention rates, delivering robust cash flows and benefiting our valuation. And as we get bigger and better, operational benefits will drive down the cost of our fit-outs and service delivery but not, of course, at the expense of delivering a first-rate experience. When combined with an increasingly robust track record of generating a fully managed service profit, we expect yield compression from the 10% currently applied by our valuers, bringing the income yield closer to alternative operational real estate investments, such as self-storage and hotels. All this gives us the confidence to deliver our flex ambition in a portfolio packed with opportunity. 4 years ago, we spotted a shift in customer requirements and launched our first flex spaces, building this to just under 90,000 square feet. Today, flex totals some 250,000 square feet or 13% of the office portfolio. With our first -- sorry, with our customer-first approach, we're focused on selling solutions, not just renting space. And we're developing an operator mindset, building on our strong Net Promoter Score. We're building our flex team. We've deepened our market understanding and launched our high-performing, fully managed product with 66,000 square feet now committed. From here, our ambitions are substantial. We're targeting 600,000 square feet from our existing portfolio with majority coming from fully managed as we take back and convert our smaller spaces. This organic growth more than doubles our existing flex footprint with the opportunity to add more from buying buildings, and Nick will provide an update in a few minutes. So to sum up from me. Customer needs are changing. Flex demand is growing and becoming mainstream for sub-10,000 square feet. Our business is well positioned. There's a huge opportunity with flex. And if you're not in it, then you're missing out on these superior returns. I'm now going to hand you over to Simon to tell you more about our leasing successes across the portfolio.

I've been given about 10 minutes to talk about our leasing success. And my apologies to Team Orange who have already heard me prattling on about this most of the morning already. But in order to do so, I'm going to talk about HQ repositioning in a moment, but I'm going to talk about flex first. And to do that, could I ask you to cast your minds back to 2018? Because lots has changed since then. For instance, my beloved Stoke City was still a Premier League team back then, not a lot of success since for the Mighty Potters, but there was instant success for GPE with our first flex space at Elm Yard. We fitted 4 units here. They let at premium rents. They let before we finished the fit-outs, and we didn't have to compromise on lease length. We followed this up with deals at Piccadilly, City Tower and many more across London over the following 3 years. These were typically marketed in a traditional manner to occupiers taking traditional leases and represented by traditional agents. But as you've heard this morning, because we manage all of our buildings in-house, it was a natural progression for us to add service. And that's what we did with Dufour's Place, which you saw this morning. This, we launched in March last year, and it let within 6 months at strong rents. This wasn't just marketed to traditional agents. It was marketed to brokers, to online broker platforms. It was using social media, short-form leases and an increasing focus on customer service. We therefore rolled out further units across London over the last 12 months, proving that this is not just geographical or building-specific. All of our flex customers are being attracted by the fact that they are in well-located, high-quality buildings. They are self-contained units, and they're coming with all the themes that you would expect from a reputable owner. And I think it's interesting if you look at the pie at the bottom that in just 12 months, the fully managed space has become such a significant part of our flex portfolio. So what have we learned from our fully managed deals? Well, experience is invaluable. I hate to say I told you so, but 2 years ago, we said that the majority of the sub-10,000 space was going to need to be fitted or fully managed. It's what we've been focusing on, and it's also been borne out by the wider market, too. CBRE's tenant rep team, for instance, have almost doubled the number of flex transactions in -- since 2018 to 2021. We have established multiple routes to market, but we've also established a reputation for reliability and high quality, and that cannot be established overnight. What that is leading to is repeat business. There's a great example of brand loyalty that you may have heard about already this morning, but I'll tell you about it now. Synthesia are an occupier in Dufour's Place. They have already outgrown that space. And because of the clusters that Dan mentioned earlier, we have managed to design them a new office in Kent House. By doing so, we are allowing for expansion by Wunderkind, who are also in Dufour's Place, and they are going to grow into Synthesia's floor and pay us a rent, which is 35% higher than that they paid last year. We're also seeing rising rents at Pollen House, where in the fifth year of transaction, the rent will reach GBP 265 per square foot. So it's all high-performing stock. What else have we learned? Well, if you look at the pie chart on the right, you'll see that we are appealing to a broad range of sectors. And not only that, there are different drivers for why they're taking space from us. 61% of our customers are maturing out of serviced offices, looking for their own self-contained space but with the same lack of hassle. The rest are rightsizing out of traditional leases, many of them using our desk booking technology to manage hybrid working policies. And I think that we will be appealing more and more to both of those because the wider market, as Steven mentioned, bigger corporates are starting to use flex more and more within their portfolio. The logos in the bottom left are just some of those. But there's one in particular I wanted to talk about, and it's Millennium Capital. They are in a traditional lease in Berkeley Street, and they have come out and taken 40,000 square feet over 5 floors for 5 years on a fully managed basis at GBP 300 per square foot. And the great news is that GPE can appeal to these kind of occupiers. With a track record such as we've now got, we can legitimately offer choice to our customers. That choice is ready to fit, fitted or fully managed. And what that does is it widens our market reach. So as flex deals get bigger, which they will -- [ and all those ] are a really good example at the moment in the city looking for 100,000 square feet of fitted space, we can access those kind of requirements. And what's more, as Toby mentioned, there's a great synergy between these 2 business streams. It is not beyond the realms of possibility that flex customers of ours today will become our HQ customers of the future. And similarly, all of the pre-let discussions that we're having right now involve rightsizing requirements, which we can facilitate with our flex spaces. So let's talk about the HQ repositioning and ready-to-fit market in a bit more detail. Demand is robust. As you can see from the pie chart, despite coming out of a pandemic, average demand is above the long-term average. There is a good sector spread, financial banking back to a typical proportion of the pie. And what's more, 40% of the requirements over 50,000 square feet are expansion-led. We're also seeing obsolescence becoming a much bigger driver for leasing. That's because the ESG suitability of people's real estate is becoming more and more into focus. So demand is good. How does supply look? Well, I don't think you'll be surprised to see that we believe that there is a big undersupply coming. These are our figures. The bar charts show what we believe to be Grade A, speculative developments coming through over the next 4 years. And if you compare that to the dotted line, which is the average 5-year Grade A take-up of space, you can see that there is a considerable undersupply. And what that means is that we are seeing areas of competitive tension, hotspots of rental growth. The West End is a key example. We've seen 30 transactions over GBP 100 per square foot, and 8 transactions over GBP 150 per square foot in just the last 6 months. Everyone we're talking to are obsessive about talent, about attracting it and about retaining it. And in order to do that, as Toby mentioned, they need to look for best-in-class space that is well located, ideally near to Crossrail, and with lots of amenity space, as you've seen upstairs here. And in order to find that, they're having to look up to 8 years ahead of lease events in some instances. So with that as a backdrop, let's just talk about 3 examples of GPE's leasing in the HQ market, starting with this one. This is the last floor remaining. And we're lucky that we've been able to fit in today because we've got 2 parties actually negotiating terms on this as we speak. The big drivers here, well located, sustainability, wellness and tech. You'll hear us talk about it time and again. Next is the 50 Finsbury Square. I think this is a fantastic example of the 2021 leasing market. We committed to this development in January last year when frankly things were very uncertain. You fast forward 7 months, and we have pre-let the entire building to Inmarsat. Inmarsat were looking for something that was self-contained, of which there are very few options. And none of those options had the kind of amenity space that we put into this building. And then finally, Hanover Square, which we saw this morning. After pre-lets to KKR and Glencore, demand never eased up. All the way through lockdown, we were still talking to occupiers. We topped out rents in 18 Hanover at GBP 121 per square foot. 20 Hanover was let to the London Fashion Academy. And then 1 Medici Courtyard has seen further leasing to KKR and UPL with rents topping out at GBP 127.50 per square foot. We've let all of the office space. It's let within 3 months. The average lease length is over 13 years. And as many of you would have heard this morning, we believe that the rents are already reversionary in this building, a really good example of best-in-class space being a massive driver for success. I'm now going to play you a very short video, which is going to outline not only some space within Hanover Square but also to put a bit of more flesh on the bone around our choice, ready to fit, fitted and fully managed through the words of our customers. [Presentation]

So my final slide is entitled What Next? More sausage dogs clearly. But with great choice comes greater flexibility, not just for our customers but also for us as our market reach widens. We expect more and more of our customers to take us up on the offer of looking at space, as you see in the picture here, but actually asking us to deliver it looking more like this. I've also told you this morning about how a robust demand is meeting an already restrained pipeline, but that pipeline is going to be further filtered by nonphysical criteria. Customers are looking for a partner, not just a building. They want a partner who shares their values and is not just interested in greenwashing, and they need a partner who is reliable and that they can trust. And I think above all, whether it's a flex customer or whether it's an HQ customer, they expect a great customer experience. And I believe that GPE are very well placed to capitalize on this demand. And if we continue to get it right, we will see greater leasing, better rents and improved retention. Now I'm going to hand over back to Dan to talk through how our next generation of buildings are being set up to meet that demand.

Great. Thank you, Simon. Hello again. So you've heard a lot about our exciting flex business. I'm going to cover our equally ambitious plans for our HQ repositioning business. I've already described slightly earlier our significant pipeline, and now I'm going to cover our 4 near-term schemes and give you more details on the proposals there and also how we're addressing the challenge of sustainability. So just a reminder of our near-term schemes, if we start in the top left, we've got 2 Aldermanbury Square. This building is going to be 320,000 square feet, which is just over an 80% uplift in the floor area over the existing building. Planning was agreed last year. And our enabling works have already started, and our completion is expected towards the end of 2025. You can move to the top right. We've got the New City Court in Southwark. That's going to be 380,000 square feet. That's a nearly 300% area uplift over the existing building. And following our original planning application at the end of 2018, we submitted a revised application at the last year. And whilst our planning negotiations are ongoing, we consider that we're going to get on-site and start in Q1 2024. Look down to the bottom left. We've got French Railways House, which is on Piccadilly. That's going to be 70,000 square feet, and that's about 25% more floor area than the existing building. We secured a resolution to grant planning consent last year, and our earliest start is towards the end of next year. And finally, bottom right, we've got Minerva House in Southwark. That new building is going to be 140,000 square feet, and that's just over a 50% area uplift over the existing building. Planning was submitted at the end of last year, and our anticipated start date for that one is going to be the end of next year. So altogether, they are going to be 916,000 square feet total from those 4 buildings, and that's an increase of 118% over the existing floor area of those properties. That will produce a total ERV up 219% over the existing buildings, and it's going to involve GBP 830 million of CapEx on those 4. And all of them will be net zero carbon buildings. Okay. So since our statement of intent and our road map to net zero, the world of sustainability has continued to move incredibly fast. And so before I go into covering off the great progress we've made in addressing our carbon challenges in our schemes, I would like to show you a short view of Helen Hare. Helen's our Director of Projects in conversation with Gary Elliott. Gary is a structural engineer, Elliott Wood. And they're going to discuss how the industry, in general, is looking at new ways to reduce embodied carbon.

I'm delighted to be joined by Gary Elliott. Gary is one of a few structural engineers that help GPE navigate the complex world of structural engineering, made increasingly complex by the overlay of climate change. Gary, what gains do you believe we've already made in office development in relation to climate change? And I'm thinking specifically in relation to materials.

Sure. So the piece that we're really concerned with as structural engineers is the embodied carbon. If we take the typical materials, steel and concrete, they are extremely damaging. We know that. So the issue is really about standing back from that and saying, well, how do we start to really think about reducing the amount of materials that we put into buildings? Can we actually look at reusing existing buildings much more and think of that as a starting point? One of the sort of challenges at the moment is that a lot of these are the green steel and the sort of the cement replacements, those are not readily available. So if you put some into your building, for example, somebody else can't put it into theirs. There's a lot of research going into proper cement replacements that will reduce that problem, but we think those things are a long way off. And then I think -- looking at timber, I think obviously, there's been a lot of noise about timber in construction. I think timber will be really beneficial, reduces the amount of loads on foundations, reduces foundation requirements. So I think there's lots of things going on. There's lots of angles to look at here, but it fundamentally starts with really requiring a kind of rethink about the way that we approach design.

So beyond materials, where do you think we're going to make the greatest wins?

It has to be about reuse. It has to be around being more intelligent about reusing the stock that we've already got. We're working with you at looking at reuse of steelwork. It's a way that we can make a real reduction in the amount of carbon that we're generating in our construction.

How far do you really think we can take the reuse of existing buildings and its material components?

I think we can take it right the way through. I mean, I think if we start from reusing buildings, beyond that, looking whether you can use the materials ideally on the same site, if you can. If not, can you use those materials off-site? And as I said, bringing in and looking at the efficiencies of any new build that you do, even if you're using existing materials, making them really efficient. So reducing grids, for example, looking at live loads so that environmentally and financially, it becomes beneficial to all.

So we know the longer-term objective is a circular economy. What do you think that will really look like for construction? And where should we really focus our efforts?

So I think one of the most interesting parts of that might be about sort of leasing versus purchase. So I think that's being done on a relatively small scale in the M&A world but also with light bulbs, for example. So you don't buy a light bulb anymore, and that pushes the emphasis back onto the manufacturer to produce an item that will last. If you then start to extend that, it's a little bit more difficult to see because the time frames are obviously much greater, but could that happen, for example, with steel frames?

Gary, it's been absolutely fascinating. And as always, great to talk to you, and I look forward to continuing our conversations beyond today. Thank you.

Thank you very much.

Good. Well, I hope you enjoyed that. The full version of the video is actually on our website. So I encourage you to watch it. It's a really rich discussion and worth looking at. So let me tell you now about the 3 approaches we're adopting for our low-carbon repositioning. The first is reuse and extend, which is what we're doing at 50 Finsbury Square that finishes later this year. And it's also what we're proposing to do at Minerva House. It's where a building has essentially got really good bones. And it's possible in certain circumstances to reuse as much of the existing building as possible and then to add to it. Our second approach is where it's not possible to reuse the existing building, we undertake low carbon new builds and where we reuse some elements of the existing buildings such as basements and foundations. But then we build using low-carbon materials and modular construction techniques. So this is what we're doing at 2 Aldermanbury Square and what we plan to do at New City Court in due course. And finally, our third approach is the circular economy new build, which is what we're proposing for French Railways House. So here, we still reuse as much of the existing building as possible, basements, foundations. And the remaining new build, we use partly from reused materials from other buildings. And as I'll speak to you in a little bit later, we're very pioneering in this area. So let's take a deeper dive and have a look in more detail at each of these schemes and the approaches that we're taking. Okay. So starting with reuse and extend in Minerva House. The CapEx here is GBP 113 million and the ERV is GBP 10.5 million. Here, we're extending the building by adding 3 new levels over the top and landscaped terracing and keeping as much of the existing frame and facade as possible. Our public realm works consist of a new public square, which is going in next to Southwark Cathedral, which you can just see on the left there, and a new east-west pedestrian route through the building. And this building has really been designed to maximize the river views, which are amazing. From a sustainability perspective, we're returning approximately 80% of the existing structural frame, and we're reusing all of the foundations in that building. And there's also going to be energy-efficient heating and cooling and potentially openable windows in that property as well. And the building will be fossil-fuel-free, so no gas. And any generators that are required by any of the occupiers, that will be powered by biodiesel. So it's early days in the design process, but we're targeting an embodied carbon level here of below 340 kilograms per square meter. And as you'd expect, all of the -- it has exemplary wider sustainability credentials on the rest of the building. So next, our low-carbon new build, starting with New City Court. The CapEx here, GBP 377 million; and the potential ERV on this one is GBP 29 million per annum. So here, we're proposing a very sustainable 26-story building as well as the restoration of some adjoining listed properties. And the high-quality public realm in this one includes a new entrance to London Bridge Station and a rooftop garden with a cafe and a restaurant with it, too. In sustainability terms, we've optimized the structural grid, and that will just minimize the new carbon content. And there'll be energy-efficient heating and cooling as well. This building, too, this one is also going to be fossil-fuel-free as well as having significant greening and biodiversity. Again, still early days in the design process but we're targeting an embodied carbon level below 572 kilograms per square meter, and that's our 2030 target. And it, too, will also have exemplary wider sustainability credentials. Okay. We'll also have 2 Aldermanbury Square, another low carbon new build where the enabling works, as I said, have already started. The CapEx here is GBP 268 million, and the eventual ERV, GBP 24.3 million per annum. So this is a new, highly sustainable 12-story building, big landscaping, communal terrace up at the top, where the views across London are absolutely stunning. And the typical upper floor is about 28,600 square feet, and it's got terraces on each side and fantastic natural light. At the ground floor level, we've got 3 entrances to this building, and there's also, very importantly, an entrance for cyclists. And we're creating a new pedestrian route, public realm improvements and then a new garden above the podium of City Tower, which we own next door as well, for amenity. And we've been working quite hard to reduce the embodied carbon level on this one, using several factors. We're increasing the use of cement alternatives in the concrete. We're sourcing the structural steel from electric arc furnaces, and I can fill you on the detail later if you're interested, but they'll be powered by green energy. We're reusing some of the existing steel from the deconstruction of the building for the roof plant areas and some of the structural elements. And interestingly, we're using recycled raised access flooring, which is quite a new concept. And we're applying the electrification of all the plant that's used to build a new building. And the equipment, they are also being electrified as well. And in order to improve our energy efficiency in the building, the facade is being designed to maximize daylight but also minimize solar gains, so quite a delicate balance. And we're also connecting in that property to the local district heating system down near Smithfield. So again, as shown in the table here, working hard to reduce the embodied carbon levels at each design stage. And then here, too, we're trying to target below our 2030 benchmark of 572 kilograms per square meter. And we're really still pushing the team to do even better than that to shoot the lights out. Okay. Finally, we've got French Railways House, where we're proposing a circular economy new build. CapEx here, GBP 70 million, and our ERV of the finished building will be GBP 8 million per annum. Again, a new build, a highly sustainable 7-story building with extensive landscaped communal roof terrace, and we have new retail on Piccadilly and in Jermyn Street as well. And interesting here -- the really interesting bit is we're proposing to reuse the structural steel from City Place House, which is the property that's being demolished to make way for 2 Aldermanbury Square. It's quite in early stage, but if successful, we'll probably save around 1,000 tonnes of carbon. And there's a 99% reduction in embodied carbon in the new building's structural steel frame. So there are other benefits, too. Reusing steel is quite long. And actually, what it enables to do in French Railways House is to remove all the on-floor columns which, from a leasing perspective, is an absolute plus in that building. We're also proposing in French Railways House to reuse all the existing stone cladding, and we'll be reusing the existing basement and foundations. And too, on that property, we're having openable windows, and that too will be fossil-fuel-free. So all of those factors, I mean they're absolutely great, leading, cutting-edge initiatives for GPE to be undertaken on new development. And if they're successful, we'll be targeting an embodied carbon level of less than 400 kilograms per square meter, and that's actually comparable to a retrofit of the existing building. It's an important comparison. So just to wrap up, we've got a very significant HQ repositioning program. 50 Finsbury Square is progressing really well, and we'll complete that at the end of this year. The pre-let, as we said, to Inmarsat is already in place. We've secured, as a result of that, 94% of the ERV of the building. And there are encouraging discussions with all those retail units, which sit around the edge of the building as well, and we've only taken 50% of the profit to date. So our near-term program with land and CapEx, that will be a potential commitment of over GBP 1 billion. And as you'll be aware, when we commit to schemes, we're looking for mid-teens target profit and cost and an unlevered IRR targeted of over 10 -- just over 10%, so with lots of performance to come there as well as a total of GBP 70 million of ERV from those properties. And I think as we've spoken -- we've all spoken about it, there's a premium emerging for sustainable buildings. All those buildings, as I said, will be highly sustainable. So there's potentially even more to come in rental terms from those buildings. So I've given you update on the schemes and insight into how we're trying to reduce the carbon footprint. Let me now hand over to Janine, who's going to talk a little more widely about our sustainability.

Good afternoon, everyone. By now, you will have no doubt that sustainability touches everything we do. Dan and Helen have just touched on some of the innovative ways in which we are responding to the challenge through our developments. Sustainability has been a key theme for us for more than a decade, and we've been delivering BREEAM Excellent buildings since 2012. But what is clear is the speed with which these issues have become both a strategic and economic imperative. So let's look at why. National and local government are regulating. We've been talking about the introduction of a minimum energy efficiency standard of an EPC B by 2030 for a while. Implementation legislation is awaited. Furthermore, the government is also legislating on a new energy performance rating, requiring the public disclosure of energy consumption of commercial buildings at an asset level on an annual basis. Occupiers will therefore be able to compare their potential energy performance of their buildings against their actual performance. And it's widely expected that these new ratings will become more challenging over time. And local government are acting, too. The Greater London Authority only last week brought out local planning guidance on whole life carbon, firmly signaling a retrofit-first policy and the need to design for disassembly and reuse. So how are we responding? Our recent modeling suggests, at today's cost and today's EPC ratings, an investment of approximately GBP 15 million to GBP 20 million, around 1% of our gross asset value, will be needed to upgrade our current portfolio to an EPC B rating. Though this should be taken in the context that costs will change, buildings will enter our development pipeline and requirements to achieve a B rating may tighten as building regulations are updated between now and 2030. Don't forget there's increasing evidence that buildings with better sustainability credentials deliver better returns. Addressing the ratings forms a key part of our road map to net zero and our approach to climate resilience, and we're making progress. 95% of our assets now have EPC ratings. 38% of our assets by floor area are now A or B-rated. However, research undertaken by the Better Buildings Partnership has shown that there is no correlation between EPC rating and the actual energy performance of buildings. So tackling energy consumption is just as urgent. We're rolling out technology across our portfolio to provide an improved understanding of where we and our customers can make energy efficiencies. Our work as one of the pioneers of a new building rating that assesses energy performance in use, known as NABERS UK, has also supported this learning. 2 Aldermanbury Square will be our first development to deliver a NABERS UK rating, and we will also be rolling it out across our portfolio. Our decarbonization fund is accelerating the retrofitting of energy-efficient technology into our existing buildings and will help us deliver cost savings for our customers. The full GBP 403,000 in the fund for the year ended March '22 has been allocated to projects across our portfolio to improve energy efficiency. Meanwhile, 50 Finsbury Square remains on track to become our first net zero carbon building, 8 years ahead of our original net zero carbon target. Here, our internal carbon price has delivered real behavioral change. With our project management team and supply chain partners working together to reduce the embodied carbon of the development to lessen the impact on project costs and to reinforce and communicate our approach to designing sustainable spaces, in the coming weeks, we will be launching our customer-focused sustainable spaces brief for our supply chain and other stakeholders. And we know that ESG regulation is impacting you, too. Hargreaves Lansdown reported that net flows into responsible funds in the first 9 months of '21 were 6,000% higher than the same period 5 years ago. But with growing numbers of ESG funds and green products and the EU taxonomy now implemented, there is an understandable pressure to provide transparency on sustainability performance, and the U.K. taxonomy is just around the corner. Our proactive approach to communicating with investors on sustainability has therefore never been so important as expectations on clarity of reporting continue to grow. We've been reporting in line with the Task Force on Climate-related Financial Disclosures for 3 years. However, our reporting will be further enhanced in May. And in November, we will be launching a climate resilience strategy, defining how we are addressing climate risk and creating climate-change-resilient spaces. And most importantly, our customers are also embracing sustainability. More than 1,200 companies worldwide, that's more than 20% of global capitalization, have demonstrated their commitment to sustainability by ensuring their carbon emissions targets are certified by the Science Based Targets initiative, and we're one of them. In a recent survey, 41% of SMEs and 60% of large companies said that improving their sustainability performance was a high priority for them during the next 12 months not least because of the war for talent, with 67% of 16- to 24-year-olds rating the sustainability credentials of their employer to be important or very important. And we are responding. We're engaging with our customers from the start of our relationship to understand from the off how their aspirations and our goals align. Designing sustainability exemplary buildings is key to attracting customers. And whilst delivering excellent or outstanding BREEAM ratings and EPC A or B ratings is a given, if the buildings are not performing efficiently once occupied, then we're not delivering for our customers. Partnering with our customers is therefore critical. Green lease clauses help to an extent, but communication and collaboration are far more effective in delivering improved performance. That's why we've established energy forums in our buildings to work closely with our customers to improve building performance, so a real pincer movement of push-and-pull factors at play here from our regulators, investors and customers, making sustainability a strategic imperative for our business. So what's coming next? Legislation on carbon is only going to increase, moving from mitigation to regeneration. The EU taxonomy may have led to more engagement on ESG, but legislation built around the premise of do no significant harm is just not going to do the job of responding to the climate crisis. Up to now, national government has been focused on energy efficiency of existing buildings. But following the lead of the Greater London Authority, regulation of embodied carbon in the coming months or years is a certainty and will drive change. Societal pressure and playing rules will demand closer scrutiny of developers who focus solely on new build development, hastening the creation of a market for building materials to be reused and recycled. Cross-industry collaboration is now in full swing to create a net zero carbon building certification scheme. Could this lead to some owners of buildings who previously marketed their buildings as net zero needing to reconsider their credentials? And we are ready. Our road map to net zero goes beyond the requirements of Science Based Targets. You have heard that 2 Aldermanbury Square is set to hit our challenging embodied carbon targets 5 years ahead of schedule. With our innovative project to reduce the steel from 2 Aldermanbury Square and our potential development at Piccadilly, we're working hard with our supply chain partners on a more circular approach to development. And thus, our first NABERS UK-rated building, it will be delivering on energy efficiency, too. I touched on our climate resilience strategy earlier. COP26 certainly increased the volume of climate resilience in nature-based solutions. A beta version of a nature-related risk management framework has already been released to incorporate nature-related risk and opportunity analysis into financial decision-making. It's also a key focus of the IPCC report on mitigation of climate change, which was issued on Monday. There is no doubt in our minds that nature will be a big focus in the coming years. We anticipated this, incorporating nature into our commitment to create climate change resilience basis in 2020 when we launched our sustainability statement of intent, The Time is Now. AND we incorporated biodiversity into our ESG-linked RCF. You've seen some of the results of this approach today at Hanover Square, Dufour's Place and here at Newman Street. Connecting people with urban nature is also a key pillar of our social impact strategy launched in November because not only is green space good for health and well-being, it makes our buildings and communities more resilient to climate change. Today, I've mainly focused on the E of ESG. However, we firmly believe that the S must be tackled at the same time. There is growing recognition that business must address social issues and rightly so. Inequalities are worsening. Overheating, flooding and escalating energy bills are all impacting the disadvantaged the most. In our social impact strategy, we set out how we will deliver GBP 10 million of social value by 2030. And this week, we launched our new charity partnerships: the first with XLP, a charity working to create positive futures for young people from disadvantaged backgrounds; and the second with National Energy Action. We'll be working together to support households in our local communities who are living in fuel poverty. So delivering on our purpose then, unlocking potential, creating sustainable spaces for London to thrive. I'm now going to hand over to Nick, who will explore how this will deliver further value for our stakeholders.

Thank you, Janine. Delivering on our purpose is at the heart of all of our activities. And hopefully, as you've heard from the team, we believe we can do this by exploiting the strong synergy across our 2 business streams with significant opportunities for growth in both. And crucially, they will combine to deliver attractive total returns with upside potential. Our HQ repositioning activities will primarily drive capital growth as development surpluses are created. With GBP 1.1 billion of prospective gross development costs, the maths are clear on the scale of these potential surpluses given our track record of beating our typical 15% profit on cost underwrite. As well as creating value, this development will also deliver more than GBP 72 million of high-quality ERV. At the same time, our flex business will deliver much higher net income per square foot as we target a 6% plus stabilized income yield as we organically grow our offering to more than 600,000 square feet. Plus, as we've already seen, our flex activities will drive capital values, and we expect this to grow further through customer retention, operational economies and yield compression. Taken together, this supports our goal of delivering returns well ahead of our cost of capital. And all of this can be delivered from our existing portfolio, and we have the financial capacity to deliver this, too. Our givens of financial discipline and strength will not change. Our approach of conservative financial leverage will continue given our single London market focus combined with our operational gearing through development. So you should expect to see us maintaining sector-leading debt metrics as well as our exceptional financial flexibility and liquidity. As we show on top right, we have the capacity to finance both our development CapEx and refurbishment spend to deliver our flex growth with our prospective LTV peaking at below 40%. And remember, that's before factoring in development surpluses and prospective sales. Equally, in the event we need more capital, we have a strong track record of successfully accessing both equity and debt markets across a wide variety of products. From a debt perspective, we're well positioned with our sustainable finance framework in place, our marginal cost of debt below 2%, and our overall rate only 2.2%. And from an equity perspective, our access is well proven although, of course, not taken for granted. And we're also well versed in using JVs to access new opportunities and capital as well as sharing risk. All of this is relevant as we think about acquisitions. Yes, the investment market remains competitive but we are primed for action with our clear givens and our ability to reposition entire properties into best-in-class sustainability exemplars. Opportunities to add to our portfolio are emerging, whether that's environmentally stranded assets, development opportunities or assets ripe for flex conversion, all in attractive Central London location. And you can see we currently have around GBP 1 billion of deals under review, half of which would be for flex. We've been refining our flex acquisition search criteria as we build both our knowledge and our capabilities. As you can see, we're looking for amenity-rich locations with GPE-clustering opportunities, buildings which are well suited for delivery to customers in 3,000- to 5,000-square-foot units, ideally offering both internal and external amenity space and ultimately delivering our targeted 6% plus stabilized income yield. And as we announced last week, we've landed our first flex acquisition, hitting all these criteria at Gresse Street. It's in a location we know well, only a stone's throw from here in the heart of Fitzrovia, close to both Crossrail and a number of our other flex buildings. We bought it for less than GBP 900 a square foot, and we'll achieve vacant possession next year to facilitate refurbishment and conversion to a fully managed offer. We're expecting to achieve headline rents above GBP 200 per square foot and hit our stabilized income yield target. And as the year progresses, we expect that there'll be more acquisitions to follow. Now turning from acquisitions to disposals and the reiteration that our recycling discipline continues. On the HQ development side, you should expect to see our track record of value crystallization to continue as business plans are delivered. With regards to our flex space, we're ensuring exit optionality through the appropriate agreement structures, although we recognize that the higher income return will add to ongoing ownership attractions. Equally, we'll be maintaining our mid-cap model, seeking to deliver outperformance and ensure individual deals can move the needle. But we do expect to see emerging benefits from increased scale as portfolio clustering facilitates shared amenity and growth space for our customers in a locality. Moreover, we anticipate operational economies of scale through the investment we've been making in enhancing our customer-first capabilities with head count up 20% in the last 3 years, driven by additions to our customer services, marketing and sustainability teams. Our total return focus continues, too. As we said in November, we're expecting a near-term EPS reduction given income forgone from the Old Street sale and the large one-off surrender premium in H1. Moreover, we anticipate further short-term EPS pressure as we secure VP to deliver more flex space and our near-term developments, a similar situation to the one earlier in the last development cycle when we reduced EPS to facilitate the subsequent doubling of total returns. So as we create more best-in-class HQ space with the associated development surpluses and we deliver more flex office space with a higher income return, we are confident of delivering long-term total return outperformance. Now over to Toby to wrap up.

Very good. Thank you, Nick. Thank you, team. We're nearly there. So just let's try and bring all of this together then and summarize. And we think we have an evolving and a very exciting strategy in place, focused on HQ repositioning and flex, 2 very complementary overlapping business streams, both satisfying customer needs of flexibility, service, technology and crucially sustainability and both with strong growth potential. And we also think that the portfolio we have today is really well matched to allow us to deliver for both of those streams, best-in-class and sustainable spaces and which will allow our customers to attract the very best talent and then allow them to meet their own ambitions. We think London retains its strong and long-term attractions as a global center of commerce. We think market fundamentals remain supportive. We're seeing job growth already, and we're seeing attractive demand for our spaces. And we're seeing high barriers to entry, and they're only going up. And you heard from Janine as to some of the new barriers that many of our competitors simply do not understand how to address. And all that means that supply of best spaces, we think, remains tight for some time to come. Now we clearly, as you I hope would agree, have a top-rated team already, but we've restructured. And we've restructured to make sure that we have the appropriate skills to allow us to deliver on our aspirations and to enable us to build on our already strong Net Promoter Score. But at the same time, we're going to preserve the core qualities that have made this business great: focus, capital discipline, financial strength, mid-scale, ability to read cycles and themes, product evolution but always delivering quality. Bring all that together, you've got a differentiated strategy and a business we think with really exciting prospects.