Landlord Derwent London has said it will commit to building a £400 million office development on Baker Street, despite some concerns in the market that working from home is here to stay.
Chief executive Paul Williams said: “The significant operational progress made in the third quarter and the group's strong financial position give us the confidence to commit to our next major development at 19-35 Baker Street."
That £400 million project comprises 293,000 square feet of space, of which around 200,000 square feet is offices.
Derwent expects construction to start in the second half of next year and complete in 2025.
The update came as the group said it has now collected 89% of the rent it was due on the September quarter day. It added that £16 million of leases have been extended since June , and £4.6 million of new lettings have been agreed in the year to date.
Scores of office workers have done their jobs remotely since the lockdown started in March. There have been some industry concerns businesses will look to allow people to work away from the office longer term.
However, Derwent’s Williams said a number of people had been returning to the firm’s West End buildings over the summer, and he expects that to continue once the latest lockdown ends.
He said some tenants had the mindset of “we are better together and in together”, and added that for many people working from home had been hard.
Williams told the Standard: “We believe that if we build the right buildings, with the right quality, you get the demand.”
Analysts at Jefferies last month wrote in a report: “Of the 12m sq ft London offices under construction, 60% is taken, so there is an emerging scarcity and the pre-letting market is expected to be brisk.”
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