Market Report: Drury House

This market report provides an analysis of Drury House, a multi-let office property located in Covent Garden, London. It includes information on the property's valuation, income, market value, and SWOT analysis. The report also discusses the location, accommodation, and tenure of Drury House.

MARKET REPORT: DRURY HOUSE
MARKET REPORT: DRURY HOUSE

MARKET REPORT: DRURY HOUSE
Executive Summary
The Property
Address - Drury House, 34-43 Russell Street, Covent Garden, London, WC2
Main Use - Office
Valuation Date1 November 2018
Tenure- Freehold
Total Income- 2,040,460 pounds per annum
Market Value- 42,250,000 pounds
Yield Profit- 4.52%
SWOT Analysis
S - It is a multi-let property.
W- Office rent including the top-ups of vendor rental is low passing.
O- The 2021 block date of office gives an option for refurbishing
T- A decline in the renting of offices after Brexit is a significant issue.
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MARKET REPORT: DRURY HOUSE
Table of Contents
The Property....................................................................................................................................1
Valuation..........................................................................................................................................3
Scope of Work.................................................................................................................................3
Assumptions....................................................................................................................................6
Property Description........................................................................................................................7
Market Report................................................................................................................................11
Market Description........................................................................................................................11
Valuation........................................................................................................................................13
Pro-Active Management................................................................................................................13
Valuation Commentary..................................................................................................................13
Reference List................................................................................................................................14
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MARKET REPORT: DRURY HOUSE
Valuation
Valuation Report
The building in question, a registered and qualified RICS surveyor to understand the authenticity
of the claims made by the owners has valued Drury House. Freya Group is supposed to fund the
property, and they can go as high as 40 million pounds in any commercial property in the United
Kingdom, given that the location of the property is vital for the commercial development of the
group involved in the investment (Wang and Xie, 2015).
The purpose of the company to involve in the valuation of Drury House is to purchase a freehold
interest and invest in the multi-let building that the property is offering. The building is a mixed-
use property and simultaneously lets three tenants on different floors.
The value of the property is based on the market value that has been deduced, and it is at forty-
two million two hundred and fifty thousand pounds that depends on the type of contract that is
made and is inclusive of the VAT (Kopczuk and Munroe, 2015). The valuation date is on 1
November 2018, and the valuation is made by different assumptions, which might affect the
rating if the values assumed are wrong.
The property is as stated a multi-let building that allows offices, bakeries, as well as restaurants,
to work under the same roof but there are certain restrictions like the use of the valuation done by
any client exclusively as has been stated in the purpose.
The valuation of the property that is being used for a specific purpose may not be published
without the approval of the client or the owner. However, the strength of the building, Drury
House lies in the fact that the tenants of the building have no personal or professional conflict of
interest with one another or with the owner of the property (Small et al. 2016).
The valuation has been done according to the standards set by RICS Valuation - Global
Standards 2017 (“The Red Book”).
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MARKET REPORT: DRURY HOUSE
Scope of Work
The building provides retail kind of accommodation, which is about 4,572 sq ft or 424.7 sqm.
The first floor provides a frontage to Russell Street and the space in the internal part of the
building is divided into two units (Bellman and Öhman, 2016). These pieces of information and
the other data regarding the geography, environment, or the value of the property have been
collected from the Office for National Statistics, BNP Paribas, Pricewaterhouse-Coopers, and
Colliers, that are specific and right.
There are five floors in the building with a ground floor reception as well as a lower ground
floor, and all of them have been inspected. The tenants of the building name, Wardour
Communications, Beamly and a fashionable restaurant, which is by CHLOE work at different
floors and the four leases that have been provided are outside the Landlord & Tenant Act of 1954
(French and Sloane, 2018). There is also the Weighted Average Unexpired Lease Term of about
6.8 years to the expiry of the lease on the let space.
Figure 1: Offices in Drury House
(Source: Allsop, 2019)
The property that is being discussed here, Drury House is located in one of the most vibrant
places in London and the environment around is has good working and living conditions. The
Covent Garden Piazza is only a walk of two minutes from the property, and there have been
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MARKET REPORT: DRURY HOUSE
recent as well as drastic transformations in the Piazza. The place not only has stores like Chanel,
Apple as well as Ralph Lauren but also has an assortment of fine restaurants like The Ivy, Cafe
Murano, Henrietta, and others (Kucharska-Stasiak and Źróbek, 2015). As a location, Covent
Garden is renowned too for the entertainment amenities that it upholds and is one of the most
popular places to visit in the world. It is not only recognized as the perfect location for setting up
offices but also gives place for the creative industries to survive.
Drury House is only 6 minutes walking distance away from Holborn and 8 minutes walking
distance away from Charing Cross.
Figure 2: Amenities in Covent Garden
(Source: Allsop, 2019)
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MARKET REPORT: DRURY HOUSE
Figure 3: Communications around Drury House
(Source: Allsop, 2019)
Assumptions
The report that has been presented here is based on the market value of the property called Drury
House located in Covent Gardens, London (Kara et al. 2017). Market value has been explained
properly in the International Valuation Standards and it can be stated as an amount that has been
estimated and for it a liability or an asset has to be exchanged on the exact valuation date that has
been confirmed between the two parties involved- the buyer who is willing to buy and the seller
who is willing to sell, and the transaction is carried out at an arm's length. The transaction is
made possible only after the proper marketing of the property, and it looks over the fact, which
involves the parties to act in a prudent and knowledgeable way without the issue of compulsion
from anyone.
The assumptions are made based on firm grounds and on the trust that can be shown on the
contracts, which have been drawn regarding all commercial aspects of the property (French and
Antill, 2018). The tenants present are from different industries and do business involving
different customers. While one sells jewelry, the other is a communication company. Along with
the office units that have rented out the building, there is a bakery as well, and they all seem to
comply with the rules and regulations of the building. They all agree to the contracts made and
pay the rent at the right time along with some measures for small maintenance and service
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MARKET REPORT: DRURY HOUSE
charges. The presence of any kind of restrictive covenants is not there. Therefore, it would in no
way affect the value of the whole property.
There are no encumbrances or onerous clauses attached to the property at Russell Street, and
there are no liabilities that are attached to the rights of correct ownership on Drury House
(Suresh, 2017).
The property was constructed in the year 1980 and was made as a building of built for office
purposes. The building is still strong and needs refurbishing according to the tenants'
requirements. The electricity, as well as a supply of water, is without a problem and the services,
as well as software, have no internal defects.
Figure 4: The buildings external structure
(Source: Allsop, 2019)
The building has followed all the rules and policies that were part of their grant for construction
of the property and is only positively affected by the planning or the developmental changes of
the town.
The property is no affects the environment with the production of any kind of hazardous wastes
and there is no possibility of the archaeological residues affecting the property in any way
(Suresh, 2017). The area that the property is located in poses no danger of any natural calamities
like floods or contamination of toxic chemical substances. The building faces no risks from
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MARKET REPORT: DRURY HOUSE
earthquakes destroying it in the future as well. The property Drury House meets all the criteria’s
of sustainability as is set the construction related laws of the United Kingdom.
The value of the property remains unaffected from the influences of Brexit and there are
possibilities for further tenants to rent out the building for commercial purposes. Cost of
refurbishing is low and the low passing rent of the offices is about 60 pounds per square foot.
There is no grading of solvency, and the building has an abundance of natural air and light as
well.
Property Description
Location
Covent Garden is noted to be one of the prime locations in London. It may be mentioned in this
regards that the property in question by the Freo Group, Drury House is located in Covent
Garden, which is attributed to one of the most vibrant districts in London. Entertainment
amenities are one of the major attractions of this property, which is well-connected to the Theatre
Royal, Somerset House and the Royal Opera House (Espindola and Wang, 2015). Covent
Garden is also one of the most famous tourist destinations in London, accommodating
approximately 20 million tourists in 2017. Several offices are known to be situated in this
particular locality, including DreamWorks Animation, Google and more (Allsop, 2019). Covent
Garden lies near the Charing Cross and the British Museum. In addition to that, the exact
location of the property can be cited as the corner of Drury Lane and Russell Street.
Situation
Drury House is located at a few minutes distance from King’s Cross and Somerset House.
Situated a few minutes away from the Thames, Drury House is also a prime and convenient
location for obtaining food and beverages (Allsop, 2019). A range of eateries surrounds this
location, one of the most important of which can be cited as Balthazar Restaurant, located at the
corner of Covent Garden and Russell Street (Dowden, 2015). Figure 1 illustrates the exact
location of Drury House and the associated buildings and trademark establishments around the
location.
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MARKET REPORT: DRURY HOUSE
Figure 5: Drury House location
(Source: Google Maps, 2019)
Description
Drury House is a mixed purpose building, generally put out on a lease because of the elaborate
floor space and expensive rates for tenancy. In addition to that, the accommodation aspects have
been segregated into retail as well as for office accommodation. The entire building includes a
floor area of 3,374.4 sqm or 36,322 sq ft (Allsop, 2019). Furthermore, the arrangement of the
building has been devised over 7 floors, comprising a lower ground and ground floors, with five
additional floors above the ground floor (Mason, 2018). The property includes:
● A four-pipe fan coil air conditioning
● 2 elevators with a capacity of 10 persons each
● Fully accessible raised floor
● Bike racks
● Lockers and showers
● LG7 Compliant lighting
● Lower ground floor mini-football pitch
● Metal-tiled suspended ceilings
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MARKET REPORT: DRURY HOUSE
● Falls outside the Landlord & Tenant Act, 1954.
● Provisions for refurbishment as well as extend the accommodations
A typical floor blueprint is provided in Figure 2, which illustrates the floor plan for the 1st to the
4th floors. The floor space has been found to be approximately 556.5 sqm or 5,990 sq ft (Clarke
et al. 2015). Figure 3 highlights the basement covering an area of about 199 sqm. or 2,142 sq ft.
the floor plan shows the mini-football pitch as well as the bike racks mentioned previously.
Figure 6: Floor plan for 1st to 4th floors
(Source: Allsop, 2019)
Figure 7: Floor plan for Basement
(Source: Allsop, 2019)
Accommodation
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MARKET REPORT: DRURY HOUSE
Figure 4 represents the total area for rent on each of the floors at Drury House. A current rental
income rate of £2,040,460 per annum has been noted in the case of Drury House. As per Figure
4, a net floor space of 36,322 Sqft has been recovered for this particular property. Furthermore, a
capital value of £1,163 per sq ft can be noted in this regards as well.
Figure 8: Area for rent
at Drury House (March
2018)
(Source: Allsop, 2019)
Tenure and tenancy
The tenure is noted to be of
freehold with regards to
the building. The tenancy,
however, is subject to
certain to particular
jurisdictions (Sangster,
2017). Figure 5
depicts the tenants
currently taking hold of the office spaces at Drury House and the area covered by them.
Furthermore, Figure 5 illustrates the rent per annum for each of the tenants.
Figure 9: Tenancy schedule
(Source: Allsop, 2019)
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MARKET REPORT: DRURY HOUSE
Rating and Town planning
The property in question, Drury House comes under the Westminster City Council under the
London Borough Council. Furthermore, it may be mentioned in this regards that, located at 34-
43 Russell Street, Covent Garden, London, WC2, Drury House is subject to taxation under the
VOA or the Valuation Office Agency (Pawlowski and Brown, 2015). Additionally, the
Westminster City Council is responsible for the provision of local services such as waste
disposal, fire, and transport services and more.
Market Report
Market Description
The Gross Domestic Product of the United Kingdom has decreased from 1.8%, which was
reported in the year 2016 to lower value of 1.5% in the year 2017. The fall of the GDP in recent
years can be taken into consideration while calculating the GDP of 2018, which is to be
decreased to 1.4%. The Bank of England has taken the initiative to raise the rate of interest after
the financial crisis that has affected the United Kingdom (French and Gabrielli, 2018). It,
however, fails to put an impact on the commercial sector of the real estate and the property
presented here remains unaffected by it. Due to Brexit, the GDP of UK will continue to fall for
the next few years as the migration of people will reduce drastically and the sectors that rely
upon the European labor might be eliminated.
The economic growth of the leasing market in the West End office of London remains
unaffected by the slower growth of economy and moves on as the city leading global business in
the world. Covent Garden is the most dynamic kind of sub-market of the West End that involves
the TMT sector and the banking firms as well (d’Amato, 2018). The rate of vacancy is 0.83%
with a tendency to choose the ground floor for renting out making it the lowest rate of vacancy in
the sub-markets of London.
The overseas capital is investing in the markets of real estate in London because of the
transparent legal system and vibrant conditions of the economy in the West End. The
international investors have invested almost 65% of the economy of 2017 in these markets.
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MARKET REPORT: DRURY HOUSE
The demand of the vacant places is increasing because of the attractive discounts that are being
offered by the property owners, and the availability of vacant places are also better in this region
of the United Kingdom (d’Amato, 2018).
Figure 10: Commentary on the market
(Source: Allsop, 2019)
Valuation
The renting market of the Covent Garden area has to be surveyed to have a specific idea of the
kind of value the Drury House owners can expect (Nurick et al. 2015). The location, rents,
furnishing, condition of the building, spaces available, sizes of the vacant offices, and many
more aspects have to be considered while discussing the value of Drury House in respect to the
other buildings that are present nearby.
The property at 55 Drury Lane, WC2 has four floors with 4,430 sq ft area, and the rent is 79
pounds psf for 10 years.
Weston House, 246 High Holborn has six floors, and the area of the building is 3,920 sq ft with
74.50 pounds psf for the next 5 years as rent.
Imperial House, 8 Kean Street, WC2 has seven floors with an area of 3,475 sq ft, and the rent is
74.00 pounds psf for 5 years.
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MARKET REPORT: DRURY HOUSE
12 Henrietta Street, WC2 also has four floors, and the area is 4,561 sq ft with the rent being
82.50 pounds psf for 5 years from the day of the contract.
Pro-Active Management
The value of the building can be improved still by taking a few measures. With each passing day,
sustainability is becoming a significant part of the society and with BREEAM certification; the
property in question can improve the value by being sustainable (Allsop, 2019). Refurbishing of
all the floors according to the modern standards by the owners can help the property attract more
buyers in the future. The building is quite old but is strong; however, the external façade can be
modified according to the tastes of a modern day building.
Valuation Commentary
From all the calculations done, it can be stated that the value of the property, which is a little
over 42 million pounds, is just value in the current market. With the communication and
transportation of the place being so easy, the owners can well expect the price they have
presented.
Reference List
Allsop (2019). Drury House, 34-43 Russell Street, Covent Garden, London, WC2 - Allsop.
[online] Allsop. Available at: https://www.allsop.co.uk/properties/drury-house-34-43-russell-
street-covent-garden-london-wc2/ [Accessed 8 Jan. 2019].
Bellman, L. and Öhman, P., 2016. Authorized property appraisers' perceptions of commercial
property valuation. Journal of Property Investment & Finance, 34(3), pp.225-248.
Clarke, A., Hamilton, C., Heywood, A. and Udagawa, C., 2015. Research on the effect of rent
stabilisation measures in London. Cambridge: Cambridge Centre for Housing & Planning
Research.
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MARKET REPORT: DRURY HOUSE
d’Amato, M., 2018. Supporting property valuation with automatic reconciliation. Journal of
European Real Estate Research, 11(1), pp.125-138.
Dowden, M.J., 2015. Landlord and Tenant Act 1954: time for a change? Landlord and tenant
update. Journal of Property Investment & Finance, 33(1), pp.107-112.
Espindola, E. and Wang, Y., 2015. The enactment of modality in regulatory texts: a comparative
study of tenancy agreements. Journal of World Languages, 2(2-3), pp.106-125.
French, N. and Antill, J., 2018. Property valuation in the UK: energy efficiency legislation and
its impact on valuation. Journal of Property Investment & Finance, 36(4), pp.383-390.
French, N. and Gabrielli, L., 2018. Pricing to Market-Property Valuation Models in the context
of Regulatory Definitions (No. eres2018_285). European Real Estate Society (ERES).
French, N. and Sloane, N., 2018. Property valuation in the UK: Implicit versus explicit models–
the baby and the bathwater. Journal of Property Investment & Finance, 36(4), pp.397-406.
Google Maps (2019). Drury House. [online] Drury House. Available at:
https://www.google.com/maps/place/Drury+House,+3443+Russell+St,+London+WC2B+5HA,
+UK/@51.5136001,0.1225654,17z/data=!3m1!4b1!4m5!3m4!
1s0x487604cb1f853d39:0x1136759720de532b!8m2!3d51.5135968!4d-0.1203767 [Accessed 8
Jan. 2019].
Kara, A., Çağdaş, V., Işıkdağ, Ü., van Oosterom, P.J.M., Lemmen, C., Stubkjær, E. and Halme,
P., 2017. Towards an International Data Standard for Immovable Property Valuation.
Kopczuk, W. and Munroe, D., 2015. Mansion tax: the effect of transfer taxes on the residential
real estate market. American Economic Journal: economic policy, 7(2), pp.214-57.
Kucharska-Stasiak, E. and Źróbek, S., 2015. An attempt to exemplify the economic principles in
real property valuation. Real Estate Management and Valuation, 23(3), pp.5-13.
Mason, K., 2018. historic use and planning decisions: Travis Perkins (Properties) Limited v.
Westminster City Council & Ors. Art Antiquity & Law, 23(2), pp.193-197.
Nurick, S., Le Jeune, K., Dawber, E., Flowers, R. and Wilkinson, J., 2015. Incorporating green
building features and initiatives into commercial property valuation. Journal of Sustainable Real
Estate, 7(1), pp.21-40.
Pawlowski, M. and Brown, J., 2015. Part II of the Landlord and Tenant Act 1954: repeal or
further reform? Part 1.
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Sangster, M., 2017. Accumulating London. Picturing Places.
Small, G., Vail, M. and Akbar, D., 2016. Property values and regional economic vitality:
Valuation methods as an indicator of property market behaviour. Australasian Journal of
Regional Studies, The, 22(2), p.285.
Suresh, S., 2017. GIS Application for Property Valuation Using Comparative Methods; Case
Study of Maharagama UC Area. SMART Real Estate: Towards Unmet Socio-Economic Needs,
p.173.
Wang, G.J. and Xie, C., 2015. Correlation structure and dynamics of international real estate
securities markets: A network perspective. Physica A: Statistical Mechanics and its Applications,
424, pp.176-193.
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