Landlord Shaftesbury warns of inflation threat to central London recovery

Rising inflation and a cost of living squeeze pose a new threat to the recovery of London’s West End since coronavirus restrictions were lifted, according to landlord Shaftesbury.

Cafes, bars and shops on the FTSE 250 company’s estate, which includes Chinatown, Carnaby Street and parts of Soho have monthly turnover running 7 per cent higher than before the pandemic.

But the company warned that businesses on its 16-acre estate and elsewhere are “having to deal with a complex range of operational challenges”.

“Inflationary pressures, tax increases, rising cost of finance and supply chain disruption could weigh on the outlook for consumer confidence and spending,” the group said.

Shaftesbury chief executive Brian Bickell predicted inflation would continue to rise for some time but said the business was well placed to weather the storm.

“The West End is not immune but it has always had a more affluent customer base, [and] its got the international element,” he said.

“We’re not into the world of luxury — that could come under pressure if people are feeling less affluent,” he added.

A rebound in trading in the group’s estate led to rising rents and a 7.5 per cent increase in the valuation of Shaftesbury’s portfolio in the six months to the end of March. Net income from property was £41mn in the six-month period, 55 per cent above the same period a year earlier

The estate is now valued at £3.3bn, still 17 per cent below its pre-pandemic level.

“It’s not quite job done yet but we’re a long way down the road to recovery; further down than we expected,” said Bickell.

John Cahill, an analyst at Stifel, said the company was likely to be relatively well insulated from the worst impacts of the cost of living crisis.

“Central London is not bulletproof, but compared to the rest of the UK it is as close to as its possible to be,” he said.

Shaftesbury is in talks with Covent Garden owner Capco over a merger that would create a West End landlord with a market capitalisation of more than £3.5bn. The company confirmed that talks were advanced but added there was no certainty a deal would happen.

Capco, whose tenants include a number of luxury brands, “could be a bit more exposed to a decline in consumer confidence,” said Cahill.

“I wouldn’t get too worried about the Apple store just yet, but a high-end fashion retailer? Maybe,” he said.