Risk management

The Group is subject to a wide variety of risk factors arising from the overall economic environment, demand and supply within the commercial real estate sector, international debt and equity markets as well as our own properties, tenants and suppliers.

The identification and mitigation of different forms of risk is at the heart of our operating framework. We implement an integrated method of risk management which is based on our cautious, analytical approach.

Drivers of risk appetite and mitigation measures

The Group views effective risk management as integral to the delivering of superior returns to shareholders. Principal risks and uncertainties facing the business and the processes through which the Company aims to manage those risks are:

Risk and impact



from last year

Market risk

Central London real estate market underperforms other UK property sectors leading to poor relative financial results

Research into the economy and the investment and occupational markets is evaluated as part of the Group's annual strategy process covering the key areas of investment, development and asset management and updated regularly throughout the year.

Our market


Economic recovery falters resulting in worse than expected performance of the business given decline in economic output

Regular economic updates received and scenario planning for different economic cycles.

Limited commitment to capital expenditure.

Our market



Not sufficiently capitalising on market investment opportunities through difficulty in sourcing investment opportunities at attractive prices and poor investment decisions

The Group has dedicated resources whose remit is to constantly research each of the sub-markets within central London seeking the right balance of investment and development opportunities suitable for current and anticipated market conditions.

Detailed due diligence is undertaken on all acquisitions prior to purchase to ensure appropriate returns.

Our market

Investment management

Acquisitions case study

Marcol House case study


Failure to maximise income from investment properties through poor management of voids, low tenant retention, sub-optimal rent reviews and inappropriate refurbishments

The Group's in-house asset management and leasing teams proactively manage tenants to ensure changing needs are met with a focus on retaining income in light of vacant possession requirements for refurbishments and developments.

Asset management

Retention case study



Poor development returns relating to:

  • incorrect reading of the property cycle;
  • level of development undertaken as a percentage of the portfolio;
  • inappropriate location;
  • quality of the completed buildings; and
  • poor development management

See market risk above.

Prior to committing to a development the Group conducts a detailed Financial and Operational appraisal process which evaluates the expected returns from a development in light of likely risks. During the course of a development, the actual costs and estimated returns are regularly monitored to signpost prompt decisions on project management, leasing and ownership.

Working with agents, potential occupiers' needs and aspirations are identified during the planning application and design stages.

All our major developments are subject to BREEAM ratings with a target to achieve a rating of "Very Good" on major refurbishments and "Excellent" on new build properties.


Creating new space case study


Financial risks

Limited availability of further capital constrains the growth of the business

Cash flow and funding needs are regularly monitored to ensure sufficient undrawn facilities are in place.

Funding maturities are managed across the short, medium and long term.

The Group's funding measures are diversified across a range of bank and bond markets. Strict counterparty limits are operated on deposits.

Our financial position

Note 14 forming part of the Group financial statements


Adverse interest rate movements reduce profitability

Formal policy to manage interest rate exposure by having a high proportion of debt with fixed or capped interest rates through derivatives.

Our financial position

Note 14 forming part of the Group financial statements


Inappropriate capital structure results in suboptimal NAV per share growth

Regular review of current and forecast debt levels.

Our financial position



Incorrect level, mix and retention of people to execute our Business Plan

Strategic priorities not achieved because of inability to attract, develop, motivate and retain talented employees

Regular review is undertaken of the Group's resource requirements.

The Company has a remuneration system that is strongly linked to performance and a formal appraisal system to provide regular assessment of individual performance and identification of training needs.

Our people

Remuneration report



Adverse regulatory risk including tax, planning, environmental legislation and EU directives increases cost base and reduces flexibility

Senior Group representatives spend considerable time, using experienced advisers as appropriate, to ensure compliance with current and potential future regulations.

Lobbying property industry matters is undertaken by active participation of the Executive Directors through relevant industry bodies.

Environment and the portfolio

Property industry representation


Health and safety incidents

Loss of or injury to employees, contractors or tenants and resultant reputational damage

The Company has dedicated Health & Safety personnel to oversee the Group's management systems which includes regular risk assessments and annual audits to proactively address key Health & Safety areas including employee, contractor and tenant safety.

Health and safety