Good afternoon, everybody. Welcome to Paddington, and specifically, of course, to the Storey Club. Many of you won't know who you're looking at, so I just wanted to briefly introduce myself, Tim Score, the Chairman of British Land. As this is the first capital markets event that we've done since I assumed responsibility for the role a couple of months ago, I just wanted to take the opportunity to welcome you personally and introduce myself. Some of you will be aware that I've been on the British Land board for five years now, just over, and have been chairing the audit committee throughout that period. Not surprisingly, therefore, I have a finance background. My last executive job was a CFO of ARM Holdings, the tech company where I was CFO for 13 years, and retired just about a year before ARM was acquired by SoftBank in 2016.
Today is not about new strategic announcements for British Land. It's more of an opportunity for the wider British Land team to demonstrate how we are delivering every day against our clear and consistent strategy, to build what most of you will be aware is an increasingly mixed-use business. In many ways, it's a fascinating time to take over as chairman. British Land is not, of course, immune to the impacts of the political uncertainty that we're all experiencing. Nor is it immune to the structural changes that are impacting the industries in which we operate. I believe, and the board believes, that given the work that's been done in this company over a number of years, we are well positioned not only to navigate through these choppy waters, but also to be one of the companies that thrives in the medium to longer term.
Today, you'll have the opportunity to, as I say, meet the wider team, the wider BL leadership team, who are, let's face it, responsible for executing our mixed-use strategy. The space we're in today, in Storey Club, I would say is a great example of that strategy, and arguably represents British Land at its best. It's modern, it's high quality, and it's available for all of the occupiers on the Paddington campus. It was conceived and delivered specifically to respond to what we know our customers and their people want from their workplace. That's a brief introduction. I'll be around all day. I've already had the opportunity to meet some of the investors. I'll be meeting more over the next few weeks and months, and hopefully will be able to meet some of you personally today.
With that, I'd like to hand over to Chris and the team, and hopefully you will have an interesting and enjoyable afternoon. Thank you very much.
Good afternoon, everybody. Let me add Tim's, or let me add my welcome to Tim's. Thank you all for coming. One of our now retired colleagues, who ran City Leasing for us, used to talk about good leasing weather. Today, trust me, is good leasing weather. If we can't make this campus look good today, we probably should be in a different business. As I said, welcome. As Tim said, welcome to Storey Club, too. It's brand new. We only commissioned it and had it operating in April. As Tim said, it's a utility for the people, for the customers who we have on the campus, and actually beyond. Already, some 75% of the people, or rather the companies represented on the campus, have already rented new space here, and that means we're on budget from a revenue perspective.
Bear in mind, this was simply a storeroom before we converted it. It was never space that we envisaged being able to rentalize upstairs, was actually not used space at all. A real opportunity for us to do something quite different. The other thing about this, and what you'll hear more about us, is that not only does Paddington, or rather, not only does Storey Club do what I've just said, but it's part of a broader offering. You'll hear from Mike Wiseman in a bit about the broader offering we're able to give people, and this is part of it. To give you a very simple example of that, imagine a company that's thinking about how much space they need. You look at them, you help them, and they realize that they don't actually use the boardroom very often, but they still need the boardroom.
They don't need a boardroom if they can come and block book space here over the next couple of years. That can make the rest of their space usage much more equivalent. Simple example, but important. If I move on from there, I guess this slide is designed to do two things. First of all, it's to give you a sense about what today is about. As Tim said, we're not going to talk about new strategic initiatives here. We've set out our strategy. We regard it as a good strategy and one that we're on the way to delivering. Today is something rather different. I would encourage you to think about it as an invitation by us to understand our business somewhat better, understand and get to know some of our people better than you know them today.
You will hear from more than 20 people today in a bunch of formats. You've already seen some of the demonstrations. We're going to do it in a bunch of ways. I'll show you the agenda in a second. The other sense of this slide, of course, is our purpose. We've talked for a number of years about places people prefer. I sometimes think that, what is it somebody said? It's actually very difficult to figure out who first said it, that a picture is worth a thousand words. We thought we would take this example of what Paddington looked like six years ago. You'll see a full and frank exchange of views between two cab drivers. I'm not sure you've all been part of that historically.
What places people prefer enabled us was to turn these sorts of places, this place, in fact, from this into something very different. How did we do that? A bunch of stuff that you can read in a textbook in terms of meantime use. You've seen Pergola outside, which has seen something like 400,000 people use it over the last few years. We took what the canal, which was a barrier, a very unattractive barrier, frankly, and turned it into attraction. We're now the proud owner of four canal boats, which have enabled us to radically increase the amount of F&B offering on top of what we've already added. There's more to come, I'll come back to that in a second.
That really combination of things, it's also a know-how thing in order to bring those things together to create what you've seen today, landscaping and all the rest. The other thing I'd emphasize is that from then till now, it's just not soft. It's not, as a number of you were kind enough to say, great feeling, very different. It's also generated very good returns, something like 11% per annum IRR on this, as I say, on an ungeared basis for those of you who count these things. To come back to purpose. Purpose, as I see, has been very helpful to us in connecting with our people, connecting with our customers about what we're delivering.
I would argue that although it doesn't get much air time, and that's why we wanted to talk about it here a little bit, in company results and so forth, it's actually even more important than it was because of what is being asked of companies, and rightly so, by the way, in a broader sense, in terms of how we deal, how we operate, how we touch the environment, how we interact with local communities, and indeed, more broadly, what society requires, requests out of corporations if they're going to keep their license to operate. Again, when we use that wording, which is, as I say, kind of infused into the business, that is quite a useful thing to talk about in a broader context. That is where it is, and maybe just to leave you with that thought, I said about canal boats.
We're actually also, it turns out, in the business of creating new canal boats. The things you see out there are actually refurbishments. We do refurbishments now. We do refurbishments of boats. We also construct new boats. That will be a new cheese and wine restaurant, believe it or not. At least I hope it's true, because that's what they told me. Now, in terms of the agenda, you've got it in your packs. I won't spend a lot of time going through it. What I would say is, we've tried to do things in a different and interesting way. You've got presentations, you've got breakouts, you've got panels. As I said, you've already seen demonstrations. What we've been, if you like, is driven by you. In other words, you talk to us about the fact you wanted plenty of time for Q&A.
You talked to us about the fact that you also wanted plenty of information on what is going on in retail. We're trying to make sure that you're seeing and hearing about stuff that's actually going on on the ground, but also looking at longer-term factors. Those things that we think will endure in terms of importance, some of them relatively new, in the future. There it is. Moving on. As you can see from here, as I said, today is not really about strategy. I did want to put this slide up just to remind you where the business was, where it is today, where it's going in the future. What we're really going to be talking about is implementation, about the operating environment, and I say about trends. This is the context for you to see it about.
What that does mean, over the course of the afternoon is we are going to be giving you quite a lot of information in different forms, but nevertheless, a lot of information. What I wanted to really do is just give you a sense of within that context of a lot of information, what are four or five of the trends of the things that we really think are important that you should maybe keep in the back of your mind during the course of the kind of drinking from the fire hose kind of information experience you have today. In terms of strategy, really two points to make. mixed-use gives us a competitive advantage. Why is that? Because of the combination of assets, of our customer focus, our expertise, and our experience.
I think at this point we have built up a decent track record. Paddington's a great example of that, of how this can really make a difference. You'll hear how not only with our existing assets, but with some of our future assets, we can bring that expertise to bear. The second point I would highlight for you is perhaps later than many people thought, this industry is changing and there are a bunch of trends. We're going to pick out a couple in particular today. One is around what I would describe as being technology. I know that's a huge topic, but we're going to try and really concentrate in on a couple of things which we think are really important, give us a competitive edge. If we mess up on, it won't be so good either. That's the first thing.
The second thing is in terms of sustainability, always been important, been important to British Land for a long time. There is no question that that is going up in terms of importance all round. We're going to try and kind of give you some thinking as to where we think of our efforts in that space moving forward over time. The third thing I really want to touch upon or have you think about is the importance of people. That may sound obvious, it may sound weird, but this company, it is not in people terms particularly large, about 600 in total, but the expertise that those people bring is absolutely critical to success.
I guess again, the theme that I would seek to pull out for you is that what we have is a great deal of property real estate experience, and that is an absolute bedrock of what this company does. The other aspect which I think is really important, and actually which I'm also very proud of, is that over time we've added to those critical skills another set of skills which to us feel equally important and arguably much newer and therefore harder, you might argue, to acquire, and those are around things like technology. Making sure we've got people who understand code, making sure that we have people who understand the data, how to collect it, how to process it, and how to make it relevant to our customers. Those are new skills I would argue, and again, we think, really important.
To put it another way, we actually have today people we wouldn't have had five years ago who come in and look at a place like this that was a storeroom and say, "This is how I can make a great space." That gives us a competitive example quite clearly. My fourth point is around development. Development is important for at least two reasons for us. One, financially, it's been very successful. As you know, for us, there's a lot of profit to come, but equally important in terms of the overall performance over time, it is obviously critical in our capacity to continue to make our campuses better and better. As you'll hear about Canada Water, to start ground up on something very new. That is something that has delivered financially, will continue to deliver financially. Finally, my fifth theme for the day is capital efficiency.
Something we've taken very seriously for a number of years. You'll hear quite a lot from Simon and some of my colleagues too about it. Just dwell on a few facts. The one maybe that is top of mind right now, is around the extent to which we've brought gearing down over the course, relatively recently, in the course of much less than the full decade that I've been here, that obviously, if you look around the place right now, is a competitive advantage for us, particularly in the retail context, but also buybacks, also sales, and our willingness to think thoughtfully. Can you think anything but thoughtfully? Think about how we use our capital to deliver capital efficiency. That's kind of what we are looking to do today. I guess as I introduce Darren, it's worth just making a comment around organizational structure.
You won't hear much about this sort of stuff when we give you the results, but I've always been a believer that you need organizational structure to make your people effective. We found ourselves in a position where our business, where we were organized in terms of having one silo, if you will, doing offices and one silo doing retail, wasn't optimal and didn't really reflect the way we were taking the business. We took the decision earlier this year to put those businesses to effectively that part of the business into one. Leasing sitting under one person together with asset management right across the business. Darren Richards, who's going to speak in a second, was the obvious person to do that. He has been in the company since 2005.
Experience across a relatively broad segment of the company and also one of those people I talked about with really deep property experience. As I say, Darren's been with us since 2005, been on the executive committee for the last five years. With that, wherever he is, because I can't see him right now. There he is. Darren, over to you, my friend.
Good afternoon, everyone. I wanted to focus on two things today. Firstly, the importance of mixed-use, which as you've heard from Chris, is already a significant part of our business and one we intend to grow to become a core focus. I want to explain why we think we've got the assets and the expertise in order to deliver this. Secondly, I want to take you through how we're navigating the retail and office occupational markets. Particularly retail, which I know you're interested in. I'll take you through how we've been responding to it, and that what we're starting to see on the ground as a result, presents a somewhat steadier picture than some people might have thought. Let me kick off by looking at our portfolio today.
You've seen something similar from Chris, 51% in London campuses and London offices, 45% in retail, 68% overall in London and the Southeast. This already contains quite a lot of mixed-use. I'll come onto that in a moment. First of all, what exactly do we mean by mixed-use? As a general kind of industry expression, it means a combination of three elements normally, offices, retail, and residential. For British Land, at the moment, it's predominantly office assets where we've been injecting retail and leisure uses. Going forwards, we'll probably play around with those proportions a bit more depending upon the assets, that's where we are right now. For us, it's more than about just proportion and mix. Our customers become more demanding. The war for talent means that they're after increasingly quality space to attract and retain the best people.
They don't just want a great building, as you can see here, and I'll pick a few. They want transport connectivity, they want amenities, they want leisure, they want retail. They want to feel like they're plugged into a wider community. They also want from their space, flexibility. They want it to be tech enabled and increasingly they want it to be sustainable. If you deliver this, you create demand for your product, and that's what we think is playing out right now. Come onto that in a moment. That's how we're going to be driving value through this portfolio. We think we've got two inbuilt advantages here, and very simply put, our assets and as Chris referred to, our people. When I talk about our assets, I don't just mean the standing stock we have at the moment, as important as that is.
It's the potential that we have embedded in this portfolio that's really exciting. In addition to the 1.2 million sq ft of committed campus development that we have at the moment, which you all know about, we've got nearly the same again in terms of campus development in our near to medium term pipeline, including 5 Kingdom Street, just outside, which is currently in for planning. It's not just about the existing campuses. It's about our potential to create new mixed-use places. We've got that outstanding office-led mixed-use place in Norton Folgate, which is ready to go next year. At Ealing, we think we can add up to, over time, 400,000 sq ft of offices in and around the retail opposite the Crossrail station. We've got options at Kingston and Woolwich over a longer period of time.
Of course, there's Canada Water, a new fully mixed-use urban center for London. Now, one thing I should point out is, it's not just about having the assets, it's about having scale and control of those assets as well. When I talk about control, it's controlling what we call the ground scape, that's the lower levels, that's the ground level, and it's also the space in between the buildings. You need that in order to be able to deliver things like Eataly, here at 135 Bishopsgate. This is Exchange Park, also at Broadgate. I'll bring you back to Paddington. This is the amphitheater outside. It's really important, therefore you need the assets and the scale. We think we've got both of those. As I said, you also need the people to be able to deliver this.
We can leverage an operational platform with a depth of experience across development, planning, marketing, data technology, and property management. We now have a single combined asset management team. We can ensure that there's consistent delivery of our strategic goals. We've got dedicated leasing teams who you'll hear from later today, which we've been focusing on developing over the past few months, because that's the first point of contact with the most important person, our customer. You need all of this in order to be able to develop and run complex assets. We think that not many people have this level of capability or the track record, and that's really starting to differentiate us. It makes us a natural partner to work with, from sovereign wealth funds like Norge and GIC, to specialists like Oxford Properties or local governments like Southwark down in Canada Water.
We think we're really well to set up to deliver our mixed-use strategy. You're going to hear a lot about this from the team later on. I'll move on to kind of part two, as I'd call it. I'll take you through our approach to the market and what we're seeing on the ground, so to speak. I'll start with the office market. As you've heard from this morning's release, we've had excellent momentum on our leasing program. That's evidence of the continued appeal of London, despite Brexit. It's evidence of this unconventional cycle you've heard us talk about before. As Mike Wiseman, our head of London office leasing, will come up and tell you in a minute, not everyone's experienced the success to the same level.
We think this is evidence that our campus proposition is now resonating with our customers, as I alluded to earlier on. We're taking disproportionate market share, we're getting higher rents, and we're improving our leasing velocity. We're now 85%, as we said this morning, on our pre-leasing for our development pipeline. I don't just mean we're doing well on the big, shiny developments as great as they are. It's also our ability to repurpose space is becoming particularly important. Places like 1FA, where we've taken nearly a 30-year-old building and made it fit for purpose for a next generation tech occupier like Mimecast. There's a couple of other themes I want to pick out. The evolution of flex. Now, Storey's been tremendously successful for us. We're on track to have a pipeline should be accomplished by 2020, 300,000 sq ft in 10 buildings, as shown here.
Storey Club, which you're sitting in, has been really additive to our offer. We think about flex in a wider context. What I mean by that is our ability to respond to all of our customers' requirements, not just at the start of their journey, but throughout it. For example, adding core space and services as their businesses evolve. Mike's going to cover that in a bit more detail in a moment. The second theme is the increasing diversity of our customer base. We've signed deals recently, I've mentioned, with Mimecast, Peel Hunt, McCann, and of course Dentsu Aegis at Regent's Place. As we increase our weighting to tech professional services and creative, they now represent nearly 50% of our customer base. That's nearly double what it was 10 years ago.
Again, this is the campus mixed-use proposition appealing to a wider diversity of customers. You're going to hear more about all of this from Mike later and our strong progress in office leasing, but I'm going to turn to what you were asking to talk about, retail now. I'm going to flip back to our portfolio slide for this. The retail market, yes, I can confirm it's tough out there. I've been working in and around retail for the past 20 years, and it is definitely the toughest I've seen it. We all know the reasons why. It's been done to death, so I'm not going to dwell on it today. With the help of the CVA, the use of CVAs, as you'll hear later from Brona, the abuse of CVAs, it's driven a lot of uncertainty and negative sentiment towards the sector.
Stepping back for a moment, if you look through this, we can see how this is likely to play out eventually. Online will take a greater market share, we'll have less physical space, we'll have reduction of physical space, but what we'll have is polarization within that and probably a greater understanding of the role and value of a store in a retailer's omni-channel proposition. We're not there yet. To be honest with you, in terms of the whole U.K. market, including secondary and tertiary, we're probably into a 10-year workout period. For the best assets, the best owners with real expertise, you can get there a lot quicker, and that's what I think is really starting to mark us out.
Our expert people with great relationships with our customers, built on in-depth knowledge of their businesses, backed up, as you'll see outside, with a lot of data and insight. We combine this with a very purposeful and pragmatic approach to keep our portfolio full and outperforming operationally. The big question everyone asks is where are rents going? Of course, ERVs have been coming off. The truth is, the spread is going to be enormous, depending on location, depending on asset, depending on a lot of different characteristics. That means you've really got to know what you're doing. You've got to know when you can push back and be robust, but you've also got to know when you've got to face into the market. Sometimes that means, yes, rebasing rents to a level that you can then transact off.
That's what we've been doing, and that's what we're going to continue to do. That's why our leasing volumes are high, that's why our occupancy is high, and that's why our sales and footfall are high relative to the market. Ben Grose, our head of retail leasing, will be taking you through this in a lot more detail later, and Brona, as I said, will be our in-house CVA expert, will be taking you through that a bit later as well. In the meantime, I just want to wrap this up by breaking this down a little bit more in context of our current portfolio. As you can see, we've got 11% in London and the Southeast. This is multi-let retail, by the way.
That includes places I've talked about just now, like Ealing and Kingston, which are true mixed-use developments, so have the potential to do that. It also includes schemes like Whiteley, where we've previously had an investor day, which has been a very solid performer for us. ERVs have remained pretty solid there. In fact, they've actually increased over the past two years. That leaves us with the solus portfolio. That's another 7%. Obviously, there's been investor demand here. Sally will cover this later. This is the pot we've been selling out of. That leaves us with 28% of the business outside of London and the Southeast. That's our regional portfolio, which includes things like Meadowhall, as you'd expect. Meadowhall will not be immune from this. Meadowhall's hard work, as all big schemes are, by the way. We've done 72 deals in the last two years.
That is an incredible amount of volume. As you can see from here, we've had 13 consecutive months of positive footfall growth, and our Q1 like for likes are up. Positive sales growth. I'll give you another example. Falkirk and Edinburgh, 14 deals in two years, as it says there. We're getting rents out of town of GBP 70 a sq ft at the moment. Last deal three months ago. These aren't historic numbers I'm giving you. We're getting them on smaller units, GBP 70 per sq ft, and in excess of that, I should add, is about double what you'll get for a 10,000 sq ft unit. This means we can actually economically slice these units up, protect our income line, but give retailers smaller, more affordable space. Again, sales and footfall are up here as well. Let's look at this final chunk of 9% of our portfolio.
This is where performance has been a bit more mixed, to be honest with you. As Sally will cover later, this is probably where we're going to sell out from over time. I'm just going to pick a couple of assets out of this pot, partly so you can see what I'm talking about, and partly to explain our approach. These are both assets where we got Homebase bases back. We got two Homebase bases back out of our portfolio of 12. I'm going to give you two different scenarios just to explain our approach here. First of all, I'll take you as far north, thankfully, as we able to go to Inverness. We got a 50,000 sq ft Homebase base back. We decided not to slice this one up. It would have harmed demand supply tension and wasn't a great use of our capital.
If you're leasing this kind of space, 50,000 sq ft at once, we knew we'd have to lower the rent to get it away. Within a month, we're under offer to The Range, and we did a deal which is in line with our March valuation. Rents on standard size units here have come off as well. We've got two more units to let, and then we'll be 99% full here. Since The Range opened, our Q1 sales here, like for like, have gone up 17%. I'll give you a different example. Orbital Swindon. We've got a Homebase back 40,000 sq ft this time. Different demand supply dynamics, different tactics. In this case, we were able to slice it up. Lidl have taken a pre-let here. We've got two smaller units to go, which are under offer, again, at March values.
When that's done, this scheme will be 100% let. Hopefully you can see this clear, purposeful, pragmatic approach coming through. It leaves us with schemes that are full, they're affordable, and they're performing for our customers. That's very important, obviously. We're also doing deals which are starting to be reflected in our valuations. Now, of course, retail is also a key component of the mixed-use strategy, enlivening these places I was talking about earlier on. Ben and Sarah and the team are going to be talking to you later about how successful our leasing has been at Broadgate. It really has been very successful. Let me just finish by saying, we think we've got the assets, the people, and the approach to differentiate us as a landlord. There's a lot of hard work involved, and that's going to continue.
We think in this market, it won't just polarize around locations, it's going to polarize around the best owners and operators of real estate also. That's enough from me. I'm going to hand you over to Mike now. Mike's done a fantastic job of building a modern fit for purpose leasing team over the past few years. What makes Mike truly special is he started out life in the BL development team, which means he's got a really strong technical knowledge of our product, and that is invaluable when he's dealing with our customers. Thank you.
Good afternoon, everyone. As Darren and Chris have mentioned, we've had a great run over the last few years, and we're now in a position where our portfolio is practically full, and that's obviously a great place to be. Critical to this success has been the success in leasing up our developments. The committed schemes are now 85% let, with a further 9% committed to Storey. Primarily located at Broadgate, this campaign has been a real success. The slide behind me shows a summary of some of the key deals and statistics around those, which I'll come onto in a moment. We've seen high velocity with all four buildings predominantly let at practical completion. We've attracted new types of occupiers, like McCann and Mimecast to Broadgate. What's more, we're achieving terms ahead of the market.
Our average lease length, across the 1.3 million sq ft of deals, is 14.7 years, with 31.8 months rent-free. In recent transactions, we've brought rent-free below the resistance level of 36 months on a 15-year term. We've also moved rents on significantly. At Broadgate, average rents have increased by over 30% through the course of the campaigns. Over the last 12 months on a like for like basis, we've seen 13% increase in rents. This compares to a market increase of less than 5%. The latest lettings have been at over GBP 80 a sq ft, compared to the city prime rent of GBP 72.50. We've also had success in our retail leasing, successfully doubling the retail provision at Broadgate and bringing new types of occupiers to the campus. Now, the team will explore these in more detail in the breakout later.
It's clear to me that we've outperformed because of what's been described as our consistent focus on the customer. We've evolved our proposition to meet their changing needs. We've delivered the right product, both in terms of building and our offer. We were bold in positioning ourselves to capitalize on the supply-demand imbalance that we're seeing. To be clear, the market continues to feel good. Supply remains relatively constrained. Much of the development pipeline is already committed, and we continue to see strong occupier demand. We're upbeat about the interest in what little remains of our development portfolio, and even more so about the schemes that come next, like One Broadgate and Norton Folgate, and about our vacancies, where the long-term refurbishments or the shorter-term, lower-cost product.
With such diversity in the ownership of and uncertainty around schemes across London, our track record of delivery is a real advantage when engaging with the early pre-let market. I'm now going to expand on some of those themes that Chris and Darren have picked up and explain how we've evolved our proposition to respond to this. Firstly, Chris talked about outperformance being driven by delivering the best quality buildings. This is true. Not everyone developing new space has had a similar experience over the last few years. This definition of quality has changed. No longer is it about refurbishment versus new build stock. Success now is about being best in class with whatever product you're delivering. Vanilla is no longer good enough.
There is a real flight to quality. Our commitment to great design and focus on product differentiation, rather than taking a one-size-fits-all approach, has served us really well. Our developments at Broadgate illustrate this perfectly. The three buildings target different price points and different audiences. 100 Liverpool Street will redefine what a large city office building can be. Our interior architect, Universal Design Studio, use their hospitality experience to create internal shared spaces which are aesthetically striking, yet functional. This is a departure from the soulless receptions of old to something that becomes an extension of our customers' workspace and creates a high-impact arrival experience for their customers. It was this arrival experience which was critical for Milbank and Peel Hunt at 100 Liverpool Street. At 1FA and 135, we target our spend inside the building.
Working with the existing structure, we've created a raw aesthetic which radically repositions these 1980s buildings. 1FA went furthest, as you see behind me. We've created this dramatic new public space where retail and restaurants and workspace all collide underneath UBS's old trading floor at the base of the building. The result of these two refurbishments is that the likes of McCann and Mimecast have chosen Broadgate. These are occupiers who wouldn't have looked at Broadgate just a couple of years ago and certainly wouldn't have considered safer, more vanilla refurbishments. These refurbishments also demonstrate that not only do British Land set the standard in ground-up development, but also in creative reuse. These skills will be critical as we move into an environment where sustainability pushes further up the agenda and reuse becomes the norm. We've also shown that refurbished product performs.
Recent deals in 135 and 1FA have pushed rents beyond city prime rents. We've outperformed many new-build competitors, including tower floors. Product has become so important because of this recognition that the office is more than just a place to work. What we're seeing is a change in how people acquire real estate. There's a growing focus on people, on customers, on productivity, and not just on cost. This changes who's involved, with HR playing a much more prominent role, and it makes the decision-making process that much more emotional. It also means that location has become less of a priority and product and amenity offer, both inside the building and out, have become much more of a focus. We see this in terms of where occupiers are taking space, with much more moving between submarkets.
McCann's move to Broadgate is probably the most high-profile example of this in the market. Their move was all about bringing 11 agencies together under one roof and promoting better collaboration in their business. The large efficient floor plates at 135 worked really well for this. This was about much, much more than just the building. In moving people from the West End, McCann needed to be sure that there was a comparable amenity offer. Those improvements that had occurred in the neighborhood around us were really important, but it was the changes that we'd made on the ground in our ownership which made the difference. It was our campus strategy which enabled this. The changes we've effected at Broadgate and here at Paddington and the subsequent leasing success we've had at both, they demonstrate that this approach works.
Thirdly, perhaps the biggest theme right now is around flexibility. This has become something of a catch-all word. Let's be clear. To us, this means about much more than just the explosive growth of the serviced office sector. We've positioned ourselves to respond to this trend, not just by building our Storey brand, but through our wider product offer. We're now delivering fully fitted, furnished, and connected workspace to meet demand from businesses who sit between our Storey and conventional products. This is a real growth area, and it complements our existing offer. It allows us to create spaces at different price points and add on additional service packages through Storey. This really highlights the advantage of our integrated approach. Our core and flex approach is also resonating with customers.
We develop solutions for customers incorporating different types of space to help them use their real estate more efficiently and to reduce their day one space take. This means things such as taking space on flexible terms alongside a longer-term commitment, guaranteed options to grow at an agreed price during the course of the lease, working in partnership to manage excess space, and providing additional space on demand from Storey or here in Storey Club. The expansion options that we designed for Mimecast and for Milbank differentiated us from the competition and were major factors in us doing those deals. It's the meeting room conference and event spaces like this one at Storey Club, which offer potentially the most exciting opportunity to help our customers revisit how they take space.
For example, the customer name is confidential at this point, we are working with an existing occupier on a core and flex regear. This will see them reduce their long-term space requirement but rely on a BL-run solution for their meeting room and breakout space needs. This is space that they'll share with other customers. This will be facilitated by technology. We've installed sensors in their workspace to understand current usage, and this will inform the requirement and set parameters for the deal. This sort of approach gets a phenomenal response when we talk to customers about it, I really do think that this sort of deal is a sign of things to come. The flexibility that we can offer is a true point of difference with the wider market.
Being able to offer solutions rather than a binary choice between serviced and traditional changes the nature of the conversation that we have with our customers. We move from discussions about buildings and specification to one about our proposition. We're driving preference for British Land and not just our assets. This is a really exciting shift for the business. All of this means that the relationship with our customers has never been more important. As long-term owners who design, deliver, and manage our buildings, we have a real advantage here. From scale-up to global HQ, our customers really value this approach. With the increased operational experience developed through Storey, the full integration of our property management business, we are more focused than ever on delivering for our customers.
This positions us to grow our service offer, developing deeper relationships by helping them get more from their real estate. A great example of this is the growth and demand for our fit-out delivery offer. Here, we build on our track record of delivery to integrate base build and fit out, delivering program and cost benefits and making moving to British Land assets easier. We're currently on site delivering just this for McCann. Perhaps the greatest scope for growing our service offer will come through our integration of technology to enhance user experience and drive efficiencies in the management and use of space. You're going to hear much more about this from Sally and the team later. As our offer broadens, we need a clearer, more consistent way of articulating this.
We do this through the five commitments to our customers, which are shown on this slide. The overriding concept here is one of partnership, of our offer being built around you, the customer. This shift to talk about you rather than we is significant. This would not have happened in our industry just a few years ago. With our comprehensive network of spaces, a full serviced management business, an operational platform in Storey, we are uniquely positioned to deliver on this. We not only deliver great spaces in great places, we offer more flexibility than the market, and we can do more to help our customers get the most from their real estate. Increasingly, we're acting as a catalyst to make meaningful connections between our customers and to help them come together and have positive contributions to the communities in which they operate.
Others could deliver on individual commitments. Our competitive advantage is bringing these together into one integrated platform. Thank you very much for your time. I'll be around for questions later. You've heard a lot from us about the theory and strategy that sits behind our mixed-use approach. We thought it would be useful to hear from a panel of experts who are delivering that on the ground, so we've pulled one together. Tim Haddon. Tim was responsible for leading Paddington since we acquired it. Claire Barber, who until recently was the head of Meadowhall and our Central London retail business and is now head of retail development across British Land. James Lowery. James is the co-lead of our Storey business. Emma Cariaga. Emma has recently joined our exco and is co-head of our Canada Water development. Tim, as we're in Paddington, we'll start with you.
We talk to investors a lot about, I guess, what we call our competitive advantage that comes with our campuses. What, for you, are the characteristics that make the campuses successful?
I think from my side, it's all about scale. I think it's a really important part of it. I think that does set us apart from our competition. It means clearly we have a big focus on customers that Mike's mentioned. We can actually rehouse people as they grow. Dentsu Aegis is probably the biggest example of that at Regent's Place. It means we do create best-in-class office buildings, but we can also invest into the public realm and make a part of London, that we've done here, for instance. We can also add to the amenity offer and the retail offer to make sure that we meet customers' needs. Also create a sense of community through our events program, for instance, within that space. I think that's really important.
I think you look at what we've done here at Paddington, Chris has mentioned it. We spent about GBP 10 million on the public realm ahead of the launch of this building. That was a real differentiator in terms of when we came to lease the building. We leased it extremely well. It was pretty much all let by the time of PC. The level of rents we achieved were 35% above those previously achieved on the campus and in the area. A really compelling story.
Claire, you worked at Broadgate until recently. You recognize a lot of that?
I do. I think for me, there's a real buzz and energy about our campuses. I think a lot of the reason for this is the public realm. There's really nice intimate spaces where you can sit and have a meeting, or there's big spaces where people can come together. I think that along with the food, the restaurants, the outdoor dining, it creates a natural energy. I think that, for me, is attractive as a place to work. I think it also draws in people from the local community and it just makes it really appealing and exciting.
How will the approach down at Canada Water be different to what we've done here in the Central London campuses?
Well, look, campuses are not new for British Land. We have an amazing track record at it. I think Canada Water will probably be our next generation of that. What I mean by that is a couple of things. Firstly, in terms of scale, I think if you add Broadgate, Regent's Place, and Paddington together, you get the kind of equivalent scale of what we have at Canada Water. I think that's different. I think the other point that's undoubtedly the case for us at Canada Water is the inclusion of residential. I think our campuses to date have been largely office and retail led and increasingly mixed-use encompasses residential, which we can do with about 3,000 homes being proposed at Canada Water. I suppose the other thing would be to note the environment.
I think we are south of the river and surrounded by green spaces and open water. Over a third of the master plan we're proposing will be public open space and public realm. I think in sort of contrast to a more urban commercial center in our existing campuses, Canada Water provides a really nice contrast.
Okay. James, I guess one of the things we're most pleased about so far with Storey, but is maybe less tangible to these guys, is how it's been additive to our campuses. Just build on that for us maybe a bit.
Yeah. I think in simple terms, Storey adds an additional level of flexibility into the campuses. This allows us to attract a different type of customer. Typically a bit smaller, typically faster growing, and often associated with the tech sector. This helps to diversify the people on the ground in a campus, which I guess adds to the energy that Claire refers to. It also helps us address the flex needs of our larger customers as well. Doing it kind of in one location with one relationship. That might be their digital team that they want to have a different office environment. It might be a company they've acquired. For the larger deals, maybe kind of a new customer, as Mike mentioned, some of the re-gears.
We can also help to enable some of the core flex side of things, which is kind of an exciting area to explore.
Yeah. Okay. I guess building on that, another thing I know these guys are interested in is just the ways Storey has differentiated from some of the other flex operators in the market, and I know you developed it specifically to be different.
Yeah.
Can you talk us through a few of those differences?
Yeah, absolutely. I think there are two main areas really. Firstly, at a product level. We designed Storey to focus on the larger side of the flex market. We refer to scale-ups, not startups essentially. This group have specific needs. They want their space a little bit less shared, so more of a focus on their own space. They want a little bit, or they don't need as much flexibility, so we offer one to three years rather than month by month. Probably most importantly, they want the space to feel like their own. When you go into a Storey workspace, you will not see Storey anywhere. What you will see is the brands of our customers, and that's really important.
Secondly, it is kind of more on a structural level, owning the buildings, owning the areas around the buildings as we've heard about just now, and owning the service layer, which manages all of it, is a real differentiator. It allows us to control more of the customer experience. This can mean lots of little things actually, which collectively make a big difference. For example, when you walk into a building heading to a Storey space, it's the Storey customer's name on the notice board. It's not that of a third-party operator. That makes a difference. You go to the reception desk, a guest goes to reception and asks to go to the Storey space. They get directed to their office, not to a secondary reception area.
All of these, and there's a number of examples of that which it just makes the whole customer experience much more joined up and a bit more kind of grown up in the offer.
Yeah. Emma, Chris mentioned earlier kind of how we think about communities and how we think about the neighborhoods in which we operate in, and as we know, it's something that's quite important to what we do. Is it something you think occupiers consider and think about?
I think we know from our customers on our existing campuses how important it is, in terms of the building that they're going to take. As importantly and increasingly by their own staff, what is the environment they're buying into? What will their staff be able to do? How will they be entertained in their lunchtimes and indeed after hours? At Canada Water, we are already starting to think about that. We've spent five years getting to know the place, the people, and really starting to understand what are the attributes and stories that we want our future customers to hear. We've got places on site like The Print Works, which is a meanwhile use which well in advance of any development is up and running, and has seen over 600,000 people over the last couple of years for all sorts of events.
Starting to kind of make those connections and that sort of sense of community that we're pointing to.
Claire was heavily involved in bringing Eataly to Broadgate, for those who don't know. I know that for Eataly, that broader neighborhood around Broadgate was really important to them.
Yeah, it was. For those of you that don't know, Eataly is the largest Italian marketplace in the world. They had been looking for a site in London for about five years. I think their expectation, certainly the market expectation, was that they were going to the West End. We spent a lot of time persuading them that Broadgate was the right location. I think they particularly liked the links into Old Street, Spitalfields, Shoreditch, but also being part of what we offer at Broadgate. They saw their customers there. There's a wide range of customers. There's the residents, you obviously got a lot of office workers and a lot of tourists as well. Broadgate sits right on the transport hub. You've got 120-odd million people going through every year. They saw that as very appealing.
I think their one reservation was probably around weekend footfall, which they were concerned about. We actually put up a camera and recorded footfall over a week and condensed it down into two minutes. Actually, in the location they're in, it didn't show a great deal of difference between weekday and weekend traffic. I think that, along with everything that we were doing at Broadgate, really persuaded them that that was the right location.
With occupiers, is it the same with occupiers? Does this broader mix of uses play a role in attracting them into the campus? How does that kind of play out in discussions?
Yeah, I think it's really important. I think what we know about our customers is that the whole talent attractiveness and retention is a really, really important part for them these days. If you're the likes of, say, a Google or a Goldman Sachs, you can curate that environment yourselves. For kind of everyone else, they see the fact that we offer this whole campus offer as a really compelling story to them. Mike's mentioned McCann. That was a big part of them moving to Broadgate. I think, that does play to our advantage. I think take Paddington, for example. We spent a lot of time with our kind of existing and potential customers at the outset. One of the big things that they wanted to see was an improved amenity offer.
They wanted more places to go for lunch, more places to socialize in the evening, more places to go in terms of their kind of their overall leisure activities. We responded to that, and we have the ability to do it. We've added, I think, 12 different retailers over the last few years and made a real difference. I think perception-wise, that has changed. We had some really, really positive feedback from people. That's brilliant, but also it's almost more important when your largest occupier, which is Visa, who are in One Sheldon Square about 200,000 square feet, they commit, and they've just signed for a nine-year extension within that building. Really, really good news for us in terms of performance. A key part of that was the fact that those changes we've made.
James, I guess that range of amenity even more important to the smaller businesses you deal with in Storey?
Yeah, absolutely. The average Storey customer is 45 people. They really don't have the scale to provide these things themselves. To have great food offering on site outside the door, to have the kind of the bars, gyms and actually facilities like this. The Storey customers, they're kind of used to the concept of sharing. They will take advantage, and it's really important. I think equally important or if not in some cases more so, is the community that surrounds them, the sort of the professional network. That might be to share problems, kind of bounce ideas off with a kind of a fellow Storey customer going through a similar stage in their journey. More uniquely for Storey is having access to some of the larger customers across the British Land portfolio.
If you're, say, a fintech company down at Broadgate, to be sitting next to some of the world's largest financial institutions and being able to be in the same network is really important. They might be a potential customer, or they might be a potential investor.
Emma, early days obviously, but current view from you of the likely occupier mix at Canada Water?
It is very early days, but we've still had some really encouraging initial conversations from quite a wide range of different businesses. I think what's striking is that actually they all, despite them coming from different sectors, have kind of a number of themes in common. I think firstly, there is a sense from these occupiers that they want to be part of something. At Canada Water, there will be a story that unfolds as a new town is created, and that's quite attractive to businesses to be able to resonate with a place at the start of its journey. I think the other fairly self-evident point, if you look at the kind of issue of residential affordability across London, Southeast London has remained relatively affordable for normal Londoners, and as a result, there is a huge pool of talent in Southeast London.
Being located near that and able to access that is definitely attractive to potential businesses who are thinking about their future talent. I think the third point is back to something that Mike mentioned around the shortage of supply. We have got about 2 million square feet of workspace in the master plan. Where else in London is that substantial amount of space that offers businesses who are looking to grow the chance to kind of take some space and then grow over time? That will diminish as the site gets developed out. At this stage, I think that flexibility and the quantum of office and workspace is really attractive.
Claire, everyone will hear later in the breakout about our plans to develop a new town center down there. Retail is going to play a key role. Any early thoughts on the nature of that retail at Canada Water?
I think it is early. We've got the ability to add about 1 million sq ft of retail, leisure, food, and event space. I think the local community is quite interesting. There's 30,000 people in the community already. I think it's really important that we address their needs in reimagining future town center, I think is quite interesting. Looking at convenience, looking at the services that they need to support them is very important. At the same time, we've got the opportunity to create a new district for London, which I think is really exciting. Emma talked about the green space and the water that we have. I think that gives the opportunity to do something really quite unique there. Yeah, I think the opportunity is huge.
Emma, you're at a pretty key stage of your process right now. Any updates?
We are. Well, September's a key month for us. We have a planning committee confirmed for the 25th and the 30th of September. It's a two-part committee to determine both the outline master plan, which was the sort of substantial part of the planning application, but in tandem, a number of buildings that have been designed in detail, which will form part of the first phase. Assuming a positive endorsement at the end of the month, there's then a process of potential referrals to the mayor of London, and thereafter, a process for us to draw down our head lease from Southwark Council, which is contingent largely on planning. Assuming all of that runs to plan, the planning application and those three plots that have been designed in detail leave us well-placed to be able to make a start on site in mid-2020.
Tim, you've just taken on responsibility for a broader group of assets. The retail market backdrop's pretty challenging, obviously. How do you feel about increasing exposure to retail at the moment?
I think clearly there's a lot written about retail right now. I think in terms of how we operate our campuses, I think that does fit into a bit of a sub-sector in terms of the retail market. I think the big differentiator is the fact that you have a captive audience on site. Here at Paddington, we have 10,000 people who walk past the retailer's front door every single day. You have another 20,000 people who are in Eastbourne Terrace and also Merchant Square, where there's a limited retail offer. All those guys come to us as well. As a retailer, that's quite a nice story to have, and we've obviously put quite a lot of new retailers in. We worked very hard at the outset in terms of making sure that they're a different operator and a different offer to what we've got currently.
They've got a strong business model, and their brand and marketing is right and is going to work through. We also work with them in terms of making sure that marketing at the outset is really strong, and we bring that customer base in, and it meets our requirements. I think, so far we've attracted some good operators, and they're trading well.
Claire, you live and breathe this every day. You agree?
I do.
Good.
I think, the great thing about our campuses is they sit above transport hubs. That is where retailers are looking to expand. I think the best evidence that I can give you is what's happening at 100 Liverpool Street with the leasing there. We've got something like 26 retail units within 100 Liverpool Street. Opens next year. We are letting it rents between GBP 100 and GBP 300 per sq ft. There's demand from really good retailers. We're getting very strong rents. I think the other thing to look at is the performance. Broadgate Circle, as an example, that's all food and leisure. That's about 30,000 sq ft. Turns over something like GBP 32 million a year. You're looking at trading densities of, on average, of over GBP 1,000 per sq ft.
In terms of the success of retail, I think the campuses provide a huge opportunity, and that's borne out by how well we're leasing at the moment.
Tim, more broadly, in terms of development, does the market still feel supportive? As a follow-on, something I know this audience is interested in is how you think about returns on those developments.
Mike's covered it in terms of the West End and the City markets at the moment. In terms of London, it's a very supply-constrained market. That's really good, and there's a lot of pre-lets happening within that space as a result. That's a big positive. When we're looking at our new developments, that's clearly an important factor. We will also look at pre-let opportunities within that as well. We'll look at the importance for the overall campus strategy and how that feeds into ongoing rent reviews and asset management initiatives. In terms of numbers, let's use an example. Let's use this building. Back in 2014, we decided to press the button on it. That was in a constrained West End market.
That was on the back of a number of rent reviews across the campus, I think about 14 in total, a couple of years afterwards. We had, numbers-wise, we had profit and costs of about 15%, an IRR of about 12.5%, and then a year on costs of about 6.5%. Fast-forward two, three years after that, in terms of when we PC'd, I mentioned previously it was pretty much all pre-let, which was great. We let it a lot quicker than we thought. We let it at substantially better rents than we thought and the whole market thought. Combined with yield shift and the fact that we actually built it on time and on budget, we had a profit on cost of just over 75%.
Really impressive numbers. Clearly, we're not going to do that across our portfolio. Looking at, I guess, our current development pipeline, Regent's Place, we've got One Triton. At Broadgate, we've got 1-5 Bishopsgate, 1FA and 100 Liverpool Street. Collectively, those give about a 20% development profit.
Okay. Thank you. James, you've been helping run Storey since day one, helped conceive the idea. You're now over two years in. If there was one customer anecdote you could use to kind of summarize your Storey to date, journey to date?
Yeah
what would that be?
Actually, I was going to just pick up on the point, a slightly cheesy one, but the Storey name, the brand name, was all conceived around developing stories with our customers, so it's nice to kind of, to finally have some. I think a good example of that is Starling Bank. It's the sort of digital retail bank, and they initially came to British Land down at Broadgate in one of the buildings, 2FA, on a conventional lease, so no services. Quickly outgrew that space. 18 months in, outgrew. In the same building, we had some Storey space, which we were able to flip them into that space, so they kind of grew, at that point, taking services, at that point, access to shared space that met their needs at that point in time. Around 10 months later after that, they landed about GBP 175 million worth of funding.
They started growing very quickly again. We worked with them to do more of a bespoke solution on another floor which came available in that building, actually back to back to another lease. This time fitting something out for them on a bespoke basis, running the floor for them. Collectively, they sit in the building now across sort of three different products. I think what's really nice right now, we're in conversation with what's that next step. When we're having that conversation, it can be, there's a range of different buildings down at Broadgate, a range of different price points, and we can offer them a range of different products, which is pretty exciting.
Thank you all. I hope that's been useful. I've enjoyed asking the questions for a change. Normally, I have to answer them from you guys, so that's been good. Now you get a chance to ask some questions because Chris, Mike, Darren will come back on stage. They'll be joined by the panel. Happy to take any questions on what you've heard so far before we move on to the next section. Thank you, guys.
It may be counterintuitive to you why these guys are taking their microphones off. The hard, cold facts are we don't have enough microphones for everyone to be mic'd up. We'll be a brief moment. We are, as you know, going to have another session on retail. Without trying to guide you too much, what we'll probably stick off retail a bit, just questioning because we're going to give you more information. I don't want to end up repeating what Simon's going to say later. Obviously, within that constraint, we'll take whatever questions you like. Usual rules apply for those who've worked with me before. I take the difficult questions, the panel get the easy ones, and Simon gets all the really hard ones. That's supposed to work. I love it when a plan works out.
Ladies and gentlemen, questions. If there are no questions, we can move on, but I'm assuming there's got to be something here. Right. Gentleman almost at the back. We got a microphone.
Hello. Adam Hetherington, CBRE. You've been super successful on your committed development program. If you're 85% let, you've got 9%, I think, allocated to Storey. When are you going to commit to the next phase, and where's that going to be?
That's a great question. I think as we kind of, hopefully, Mike showed a little bit, what we're very pleased about is that we've got a number of developments to come, as you know, Adam, that ranges from a near-term pipeline or near-term opportunities, particularly more buildings at Broadgate, as well as at Norton Folgate. Our view is that, I would say on top of that we've got some really interesting pre-let type discussions going on in several of those places. At the moment, we are kind of proceeding on a basis to get ourselves ready to develop. As you know, we're at a relatively tricky time in terms of the external environment right now. Actually, right now, we can proceed on most of these things without actually having to take a final decision to go, no go.
I think at the moment it feels kind of, if you don't have to take a decision, given what's going on at Westminster, and yet you cannot slow yourself down, that optionality that you all, I think, have heard me talk about feels pretty good. The obvious other place to just touch on, as Emma did, is Canada Water. I think there, all of our instinct would be to start as and when we're ready to go, subject to any caveat of some real kind of catastrophic set of mistakes down the road, because sooner or later we have to create momentum down there. Until you actually start, it's going to be hard to convince anybody that we're going to start. That would be kind of, Simon, I don't know if I missed anything, Mike, anything? That's a general sense of how we're thinking right now.
It does feel like we're in a different position than a lot of other people, because I think a number of other people assumed that there'd be some drop in the market, you could restock, and then you'd be ready to go. As you know, that hasn't really happened. There is a dearth of connected opportunities and developers, and we are not in that position because we didn't take that view. We are in a position where we've got plenty to be getting on with. Next question.
Hi.
I think everybody knows we're taping this session, so if you want to give your name, then you get the opportunity of people who listen subsequently then know who it was.
Thank you. Ben Richford from Credit Suisse. Clearly the strategy is evolving more towards mixed use and Canada Water's a blank canvas in a way. I just wondered to what extent you might embrace a wider variety of mixed use, alternative real estate sectors are potentially more interesting today than core industrial servicing online through logistics, et cetera. There's plenty of areas of mixed use that you're not addressing.
Sure. Emma, maybe you want to start on with respect to Canada Water, then if you want to take it any broad. There's teamwork over there.
I was looking for a mic. Thought there was tactics to take away our microphone so we couldn't say anything. The point I'd make about Canada Water, aside from the one you noted about residential, is it's a pretty broad consent. It's an outline application with what's called parameters, which allow us to effectively pick from a menu of different uses, including the traditional British Land ones of workspace and retail and residential. We're also able to provide cultural education spaces, and we're actually with some early discussions with a university operator who's interested in some academic teaching space there. I think Canada Water's probably somewhere where we've got the greatest flexibility to do that.
Indeed, even within the residential space, build-to-rent, we've talked about a lot, but actually there are other products within the residential sphere, senior living, as one example, which would enable us to serve a much broader customer base than the traditional residential market, and house builders have perhaps in the capital to date. I think there's quite a lot of scope, and importantly, with a flexible planning permission, we can take those decisions when we want to over time. We don't need to necessarily make that call right at the outset.
Thanks.
Just behind. Hi, yeah. Max, I never really thought, Bart, that you'd be asking me as if 50 acres might not be enough. I think, as I said, what I would reiterate, that we're in a great position because of that optionality. I do not feel there's any need to go into the market. We've got plenty to exploit today, both at Canada Water, but elsewhere too. Having said that, we unequivocally have a skill set that allows us to do this. One thing that is clear to us, because we get the incoming, is quite a lot of people like the partnership that we can bring in terms of the people skills all the way through that you're hearing about today.
If we get approach, for people who say, "Look, I've got some land," or, "I've got some buildings that need redeveloping, would you come and take a share of this building and do the work for us? That's something that we would certainly contemplate, because then obviously your in price isn't quite so important. Look, we do see, and Sally is going to talk a little, as head of investment. It's not really her subject this afternoon. We are seeing some interesting things out there in the market right now. What we haven't seen is any real fall of price of any materiality. We're happy where we are today. Yeah, sorry. Front.
Yeah. Thanks. It's Rob Jones at Deutsche Bank. You've obviously talked a lot this afternoon about the significant office leasing success, particularly in the development pipeline. One of the ways when I look at the phrase, Places People Prefer, is around obviously, clearly not just the kind of curation of environments and curation of space for your tenancy on campuses, also around the internal environment within those offices. I just wonder if you could talk a little bit about the secondhand space that's effectively coming back to the market, I guess primarily across your portfolio and the extent to which, as tenants are thinking.
Go for it, Mike.
more and more about their ability to kind of offer the best-in-class space to their employees, what that means for you. Does that mean we see an environment where secondhand space sees falling ERVs and potentially rising yields? Or increased need for CapEx from a landlord's perspective? Or how are you seeing it evolve, I guess, today and go forwards?
Do you want to?
I think it depends on what's coming back and what the plans are to do with that building. I talked about that sort of flight quality, best-in-class product in whatever we're delivering. In some cases, that means delivering buildings like 1FA, which is a refurbishment. We've targeted our spend, but we've secured long leases, and that's what we're planning to do. Next door to that, we've got something very different in 2 and 3FA, also buildings that came back from UBS, where we've spent money in a very different way, but we've been able to offer something at a very different price point for a different audience who wants different types of flexibility. I think that flexibility within our business to be able to approach things in different ways is really, really important.
When I talked about the demand we're continuing to see, it's really good for what we've got left in those developments, but it's good in this sort of lower cost refurbished space. Where we're getting space back, thinking about what we're delivering, whether it's at 338 Euston Road, over at Regent's Place where we're reusing elements of the fit out to deliver this fitted product, deliver it on a short-term basis, or the longer term refurbished stock that we're doing elsewhere.
Darren, anything to add?
The only other thing I can add to that is that if you have a look at a place like Broadgate and you have a look at the average rental tone now, I think we've got average rent passing of under GBP 50 a sq ft, with an average ERV in the mid fifties. There's a lot of potential there, and I think Mike and his team, and Mike's just answered the question perfectly. We've already demonstrated we can succeed in that space, and we're getting very good at repurposing buildings. There's a lot of potential there.
Thanks.
I'll just add one point extra, which is, if I look at this business seven or eight years ago, it is fair to say that we did not have the depth of relationship. I talked about those relationships, which wouldn't allow early discussion of a customer's issue. For example, six years ago when we bought into Paddington Central, the first thing we actually had to confront was a lot of gray space that we didn't really know about. The result was the organization that had the space were kind of letting it at any price they could get. It is very difficult to build rental tension in that situation. Not only would I hope that we wouldn't be surprised in that context, our whole organization that Darren's responsible for is our asset managers owning those relationships with existing tenants.
They are expected to have those discussions, and obviously we now have the tools, in a sense of something like Storey. We can say to people, "Well, maybe we fit it out for you and we run it, and if there's a temporary period" Or, "Let's work with you," as Mike talked about. "Let's talk about what space you're actually going to need, and then talk to you early about how we might take that space back from you on a phased basis, and we can be starting to pre-let or think about it." That is a very different dynamic and helps to properly control the space. I think that's a big jump forward for us organizationally, and I think it's really something that I would argue not many people are trying to do effectively.
It's good to see some familiar faces in the audience. Crystal my introduction, so I'll skip that bit. You won't be surprised to hear that a core part of my role in strategy is to ensure we have well thought through and executable strategies to respond to both near and long-term trends. The long-term trends are the core of the strategy of our last 10 years, have included all the things you see on the screen here, and you won't be surprised by these. Our approach is to try and look a little way out, but we try and avoid to be too blue sky, and we only really go deep when we think it's actionable. Clearly right within your radar screens and which are woven through today's presentations are the impact of technology on retail.
We've done a lot of thinking in this space, as you'd expect, and changing customer needs in the workplace. You've heard all about that from Mike. My team has been heavily engaged in our workplace strategy in recent years. As some of you may know, Storey under James Lowery, was seeded in strategy. In this session, we'd like to focus on two areas which are already impacting real estate, but which we think will have a much more profound impact going forward. That's the application of technology in the built environment and sustainability. There's quite a lot of technology which applies to insights and to Smart. I'll talk about that a bit before introducing the other speakers, and Simon will introduce sustainability. After agriculture, the property industry is often said to be the least developed from a tech point of view.
It's a long-term business, and buildings don't go up overnight, which in part probably explains why we are where we are. We've been focused on tech strategy for quite a while, and we've been doing more than some of you might expect or realize indeed. We have a highly structured approach, which helps us coordinate and prioritize our effort. It's easy in this space to be overwhelmed by the sheer volume of potential opportunities we get to see. We've taken a deliberately top-down rather than a bottom-up approach, which is to mean we don't spend our time scouring the market for startups. If we've learned anything from the tech revolution of the last decade or so, it's this. First, it's the power tech has put in consumers' hands. That's why we talk a lot about customers.
How easily intermediaries have had their businesses disrupted. Third, that the biggest winners are those who've used tech to deliver great customer experiences. Think of Amazon, Netflix, Airbnb, Expedia, and closer to home, Rightmove. With that in mind, we have three core guiding principles, and you should remember these because it defines how we do things. These are shown on the right-hand side. First of all, we want to strengthen our relationship with customers, not diminish it. It's why we created Storey, it's why we have an insights team and a Smart team, and it's why we insource property management. We want to own our own data. With the data warehousing and analytics capability we've created, this allows us to aggregate and manipulate lots of different data, and importantly, to look across our portfolio.
You'll see later from Ben in this session and in the breakouts why this is so important to us. Third, recognizing we're not a tech company and there's lots of VC money pouring into the PropTech space, we want to leverage that investment. This means we may look for more partnerships and collaborations in this space, and it's why we've invested in Fifth Wall, the VC PropTech fund. We're really positive on the benefits tech can bring to our business, principally because it will help us better serve our customers. In a very tangible way, it helps us understand our customers better, it allows to provide our customers with a better experience, and will also help us make our buildings as well as our business more efficient.
By helping us use space and resources more efficiently, Tech will also help us meet the challenges of climate change. Importantly, the benefits of technology are amplified at a campus level. All those things you heard in the previous session, the things which make our campuses so special are significantly enhanced by tech. I said earlier, we've been doing more in this space than some might realize. We think we've made good progress and are toward the leading edge in the PropCo space, sorry. We're working collaboratively with some of the biggest global PropCos like Brookfield and BlackRock, and we're sharing learnings. They're also specifically interested in some of the things we're doing. Counterintuitively, our smaller size and concentrated business has made it easier for us to progress some initiatives.
Today, we're going to focus on two elements of tech in the built environment, and that's insights and Smart Places. They sit within the strategy group, as Chris said, because they're interconnected disciplines in terms of skills and focus. Secondly, it effectively brings strategic innovation into a central hub where it can get focus and sponsorship. We supplemented this with the creation of a tech council, which allows us to manage and prioritize all our front-end tech centrally. The insights team, led by Ben Dimson, is now five years old. Some of you've met him before. The Smart Places team, led by Jules Barker, is just over a year old. Both Ben and Jules have a background in consulting. They started in the strategy team, as well as wide-ranging operational experience, both within BL and elsewhere.
They've both been instrumental in elevating these areas within the business. Insights is absolutely plugged into our day-to-day thinking and decision-making, and Smart is now integrated into how we think about delivering new space, as you heard from Mike. With that, I'll hand over to Ben.
Thanks, Sally. Four years ago at our Investor Day, I spoke to you about how we were starting to use data and insight in our business. Since then, we've made some great progress, and we're using these tools both strategically for decision-making and in day-to-day operations. In the next few minutes, I'm going to talk to you about what we do, and if you haven't done so already, you'll have the opportunity to meet the team outside and see some demonstrations of different tools that we've developed. We create insights from research and data. First, that helps us to understand the needs of all of our stakeholders so we can innovate and evolve our offer. Second, it strengthens our own decision-making so we can challenge traditional approaches and supplement them with new ideas. That generates incremental value for us and our customers.
I'll demonstrate how our activities support profitable leasing at Meadowhall and help us to maximize returns from developments such as Canada Water. Later, Sally will show how, at a portfolio level, we use data to inform our capital allocation decisions. At Meadowhall, we use data to understand our catchment and also our market positioning. We merge anonymized mobile phone and credit card data with traditional sources such as exit surveys. We know at an aggregate level who shops our sites, where they come from, and also where else they spend money. This data allows us to target pockets of potential demand, particular retail categories, socioeconomic groups, or shopper missions. That informs both our leasing and marketing strategies. Suppose we find an opportunity to target affluent shoppers to the southwest of Sheffield. We'll find appropriate brands that fit the group, say, Hobbs or Whistles.
We'll work with the leasing team to create a compelling case for that potential occupier. For example, we might model expected turnover to come from the store, or we might look at the online sales that having a physical store might generate. If there are specific concerns that a retailer has, we can model those, too. For example, we might look at potential cannibalization to an existing store portfolio. We'll think about the optimum locations within a given scheme that an occupier will thrive in. We might use Wi-Fi or shopper journey data to optimize where we put the particular brand to fit the consumer. In the case of Hobbs and Whistles, that was within Park Lane, the premium section of Meadowhall.
Prior to launch, we'll share our detailed understanding of our catchments so that occupiers can have the strongest possible launch whilst being mindful of both our and their GDPR obligations. To give an example, for Rock Up, an indoor climbing experience at Meadowhall, we help them to work out precisely where to place their billboard advertising and also do their leaflet drops to make the most of their launch. Once the brand's in situ, we continue that relationship by providing them with data so that they can work out their own performance. Using our BL:comm app, which you can see outside, we capture sales data and sales densities, which allows an occupier to see how they're doing and benchmark their performance against peers, both in our center and nationally. That's got real value for them at a store level as well as HQ.
This continuous source of data allows us to attract more of the right kind of footfall and spends to our assets through our asset management and also marketing initiatives. We're really seeing the impact of that on our own operational performance. As Darren mentioned earlier, at Meadowhall, we've had 13 consecutive months of footfall growth. Q1 like for likes were up 2.6%. That's 670 basis points ahead of benchmark. We're achieving lease renewals and rent reviews ahead of ERV. The process is well established at Meadowhall, but we're also using it on our campuses like Broadgate. Here, it's been integral to the leasing we've done at 100 Liverpool Street on the ground floor. Turning now to Canada Water.
We started here by really understanding the local community, who the employers and workers are, who resides there and visits, what the current provision is for retail and leisure. We've modeled a range of development scenarios, take into account other people's plans as well as our own. By really understanding how these demographic changes will be shaped, that gives us a handle on how demand will evolve. We've submitted detailed planning, as you've heard, for the first three buildings. In phase 1A, we'll be adding 29% of workers to the area. The exact type of workers that we attract could be very different depending upon the industry mix.
To understand that point better, we surveyed 1,500 London office workers across zones 1 and 2 to really understand their wants and needs from their office space and see how that differs based upon seniorities, demographics, and the sector they work in. This provides valuable insights as to how the population can impact the blend of users we provide and specific operators. For example, a technology, life science, government, or higher education hub at Canada Water could want a different mix of retail, leisure, and community users and different operators within them.
Our model informs both the quantum and the nature of space that we deliver, whether we target the likes of Yauatcha, which works well at Broadgate, or whether we look for different kind of restaurants that might be more affordable or more individual for Canada Water. We supplemented this insight with more traditional community and user surveys to really start to target specific operators for our spaces. There's more to come in the toolkit. Looking forward, we're going to use focus groups to help define and refine the brand proposition. We'll use big data to really understand how a site is used to optimize it. The process is going to be iterative. It will evolve as our vision evolves, for example, with a major prelet. We will ensure that our decision-making is always informed and up to date.
Hopefully, that gives you a flavor, not only for the insights that data can generate, but how it's being used day to day in our business, creating value both for us and our customers. I'll now pass to Julian, who will tell you a bit about Smart Places.
Thanks, Ben. Smart. I know it's something of a buzzword in the industry, to begin with, I thought it'd be useful to explain what we mean by smart. For British Land, smart is about using technology in the built environment to make our places outstanding. If you like, digital placemaking. The property industry has been on a journey over the last few decades, starting with a focus on the physical, top left, great places in great locations. Layering on this, the growth of human-centered design in those great places, designing in a sense of community and wellbeing. The digital is the next stage on that journey, using technology to create seamless and efficient space, digital placemaking. Why does it matter? We think of the benefits across four key groups. To begin with our occupiers.
Smart helps them use space more effectively, so operating costs are lower. It also helps design and build brand-enhancing space that attracts and retains talent by creating great places to work. For our customers, the users of our space, Smart is about wellbeing and productivity, seamlessly personalizing our own space. For society. As you heard from Chris and from Sally, sustainability is incredibly important to British Land, and Smart is a crucial pillar of how we're going to achieve that. Smart can minimize the energy costs of running space and help nurture a sense of community. Lastly, for British Land, Smart is a strategic differentiator for us. It allows us to become closer to our customers, reducing the risk of disintermediation, and contributes to creating outstanding places with strong rental growth and valuation performance.
Fundamentally, though, smart matters because demand is growing from all of us for seamless connected spaces. Think about how your home, all of our homes, have changed over the last 10 or 15 years. The power that technology is giving us. We've got Nest so that we can control our heating and economize it over time. We've got smart TVs with millions of on-demand films at our fingertips. We've got Ring doorbells so that you can monitor your home securely and remotely. We've got Alexa so that you can control all of these and more with your voice. Technology is making all of our lives easier and giving us more control. By contrast, a typical office. Now, this is from the 1980s. It's over 30 years old. I wonder for many of us, how much our work environment has really changed in that time.
Collectively, we're all beginning to react against going back in time when we go to work. How is British Land delivering smart? We're working across these three pillars. First, the hardware. This is network, this is connectivity. It's things like lifts, air conditioning systems, and sensors. We're specifying the right hardware to enable us to read data from across the building systems and then write to it to control it remotely. Second, the data environment. We're upgrading our existing environment, which already gives the kind of benefits that Ben has just spoken about. We're adding in the ability to process building systems data two-way in real time. That will help us understand how space is used and then optimize it. To start with, that optimization is user-driven, but in time, it'll be automatic, driven by AI. Third, the user experience.
We're designing and procuring dashboards and apps which demonstrate how space is used and will enable users to manage it themselves. For example, booking desks, booking rooms, changing the temperature, which I think we could do within here, joining local clubs or signing up to events. How are we doing that in practice? 100 Liverpool Street. We're embedding this approach through the core areas of our building. Best-in-class network and connectivity today and with room for growth built in. Base build hardware integrated into a standalone data environment. In terms of the user experience, bespoke dashboards and control software. In addition, at the same time across the rest of our estate, we're trialing other dashboards and apps, which when they're ready, will roll out across 100 Liverpool Street and Broadgate.
As you know, we committed to 100 Liverpool Street in 2016, and it completes in around six months. That's over three years, which is obviously a lifetime in tech. We've devised this kind of modular approach, which will allow us to plug in and out the best in class in the most flexible and efficient way we can. What does the future look like? What does a smart British Land campus look like in, say, three to five years' time? A few highlights of the more detailed version you should have in your handout. Already today, we offer world-class welcome. Your visitor is emailed a digital pass similar to the one you should have received for today, and the host is automatically notified when they arrive.
We've also completed trials in our own headquarters, installing sensors so that we can understand how we're using our space in detail. As Mike alluded to earlier, we've signed our first occupier to work with. We've installed sensors in their space and will work with them as part of the re-gear that Mike talked about earlier. Within the next 12 months, we'll be rolling out apps across our campuses and customers will be able to do things like order and pay for food, join local clubs and events, and control and access their space automatically. Longer term, we'll be working on AI, things like voice assistance in meeting rooms and machine learning, managing and controlling and optimizing building systems. All of this is still at a very early stage in our industry, but there are two things that I'd leave you with.
The first is that, as Sally said, we believe that we're towards the front in terms of both thinking and action in this space. The work that I'm leading is building on several years of thinking from the strategy team and action in terms of creating and embedding a data and analytics capability led by Ben. The second thing is that smart, the power of smart is not in a single smart building, but in being able to create a network of connected, digitally enabled space across London. That's what our campuses, our network, can provide. Just going to give a quick intro to this other section on sustainability. It's one of the long-term trends Chris spoke about alongside technology. Key point on sustainability is it's not new to British Land. It's been embedded in our approach for a very long time.
It's a core element of our purpose. Our purpose is to create places people prefer, and people prefer sustainable places. When we think about sustainability, it's in its broadest sense. It's not just about managing and minimizing our environmental footprint. It extends to our communities, and we want to help those communities to thrive. We take it very seriously. At board level, we have a dedicated CSR subcommittee. What I want to do today is introduce you to the two people who lead on a day-to-day basis. There's Cressida Curtis. Cress is our Head of Sustainability and Public Affairs. She's going to speak to you about our strategy, our targets, and how we're delivering against those targets, and then give you a bit of insight in what to expect next from us. Then there's Juliette Morgan.
Juliette, until recently, was running the Regent's Place campus. She's moved into a new role in the business, which we're really excited about, which is Head of Sustainable Developments. Juliette's going to talk about how we minimize that footprint, how we tread gently on the planet. Cress, over to you.
Thank you. Hi. Thank you, Simon. I'm going to spend just a few minutes walking you through how we think about sustainability at British Land, the impact we can have, and our direction of travel as we are approaching the end of our current five-year program. Sustainability has been a specific focus area here at British Land for well over a decade, as those of you who follow our reporting carefully will have seen. Its recent rise up the national agenda is, in our view, due to two specific things. Firstly, a growing sense of unease in society about entrenched inequality. Second, a growing realization that climate change is happening, and we all know that it will disproportionately impact those who already have the least. From our perspective, environmental impact and social contribution are knitted together.
These themes are reflected in the evolving expectations of our stakeholders. Customers care far more about the impact of their purchases. Employers know that employees quite often want to make a difference through the work they do. Employers are using their environmental and social credentials to attract the best talent. Communities are demanding far more from the companies they see making profits in their neighborhood. Investors, as you will know, are more mindful about where they put their money. Every established U.K. political party is responding to this shift, but also to the fact that the U.K. simply cannot meet its environmental commitments on an international scale without a change in behavior. We expect them to do this through both tighter legislation, but also through incentives.
On every level, across our stakeholder universe, it's in our interest to stay well ahead of this agenda and also to inform the debate using our experience of what we know works. Sustainability is firmly on our agenda as a business and a very active conversation within British Land whenever we think about creating places people prefer. I took a wild guess that this audience would like some data. 5 years ago, we set ourselves some really stretching targets, and you can see their breadth here. We're doing very well with most. We've delivered a couple ahead of schedule, and some, because these are stretch targets, are proving incredibly challenging. You can read the full detail in our annual sustainability accounts. Rather than dwell on this slide, I'm going to explain about how we think about sustainability and the impact we achieve today.
Looking first at environment, some of you will be familiar with the chart on the right-hand side. This shows global annual temperature anomalies against the 20th century average over a period of about 140 years. As you can see, the last 42 consecutive years have returned above average temperatures. On its simplest level, this is driving the climate debate. Why is this important to BL? A fifth of the U.K.'s emissions come directly from the built environment. Of that fifth, roughly a quarter come from development activity and the rest is from operations. We've been very focused on reducing our operational footprint, and to date, we've succeeded in making our portfolio 44% more efficient per square foot. That's before we even start to think about what we could do using Jules' smart technology.
Combined with decarbonization of the grid, this 44% translates into a 64% improvement in carbon intensity. That's an improvement of two-thirds in just one decade. We're now able to accelerate progress on our developments as well, as Juliette is going to give you some color on in a minute. Next year, we're going to be really proud to complete a deep renovation that exceeds the standards of the 2015 Paris Agreement. It's the very first one we know of in the country, and we'll look to deploy what we've learned on delivering that building throughout our redevelopment pipeline using our sustainability brief for development. Our standards just keep increasing. Looking at social contribution, which of course is a much more nuanced area. Emma mentioned earlier that this is crucial to success at Canada Water, and we take this view right across our portfolio. Why do we do that?
Maintaining really strong local connections ensures that our decision-making is absolutely in tune with the local vision and narrative, and that builds our reputation and reinforces the license to operate, which Chris mentioned at the start of this afternoon. Our challenge is to make that as streamlined, as efficient, and as meaningful as possible. We do this through the local charter, which is our bible, but much shorter. It guides our asset teams to the five areas where BL as a business can make the most impact, but it empowers them to tailor their activity to the characteristics and the needs of their specific place. I'm going to give you two quick examples on this.
At Fort Kinnaird, which is a fantastic retail asset up in Edinburgh, which was mentioned earlier, 1 in 6 households in that community have no adult in work, which is a real problem. For the last five years, we've been partnering with three local authorities and the Department for Work and Pensions on a retail and skills center. That ensures that people in the local community can get training on the right skills that they need to access the jobs that are being created at Fort Kinnaird. It's helped well over 1,000 people into work already. It's made a meaningful local difference. Importantly for us as a business, 90% of our customers at Fort Kinnaird use that as a key recruitment source. A second example, possibly my favorite at the moment, is our Young Readers Programme.
British Land has helped 40,000 children to improve their literacy skills in the last few years. Literacy is a key life skill. It improves access to opportunities throughout life and increases life expectancy by as much as 26 years in the U.K. eight years after we started the Programme, it's particularly exciting because the very first cohort of primary school children who went through this Programme are just this summer entering the workforce. That really demonstrates our long-term ethos that we can take as a long-term investor in our places. We make considered investments to generate sustainable social value that benefits individuals, the communities, and our business. Creating such a direct link between British Land and local prosperity is absolutely front of mind as we design our next steps.
I've spoken about energy audits, operational efficiency, the local charter, and our progress on developments, which is driven by the brief for development shown here on the right of center. The final tool in our kit is the wellbeing principles. These underpin every design decision that we make, so our places automatically support the physical and mental health of those who use them. Wellbeing is literally built into our portfolio. Paddington Central is a superb example of this. You've seen in Chris's section earlier the sterile environment it used to be a few years ago. Using our wellbeing principles, we've transformed it into one that's proving highly attractive before, during, and after the working day and contributing to delivering those IRRs.
I mentioned that we're in the final phase of our current program, we're consulting on our next steps, some of our major considerations are on the screen. Most important among these is alignment to the priorities of all our stakeholders. We believe that where we can help them achieve their ambitions will also deepen our legitimacy, future-proof the business, accelerate progress, we'd love you to be involved in the process. If you are interested in being part of that conversation, please do let me or David know. I hope that's given you some insight into the work that we do. Juliette's now going to give you some examples of how our environmental thinking translates on the ground.
Hello. I'm very worried about your sustainability and that I'm the thing between you and a cup of tea. I'll spend a few minutes talking to you about the global carbon context and some of the, frankly, very cool things that we're doing across the business, to reiterate what Simon said about treading more lightly on the planet, but also how that meets some of our customers' needs. I wanted to start here. Before we do anything, we look at our place in the world and how we make a positive impact. This slide refers to a project called Project Drawdown, which is the biggest scientific peer-reviewed project in the world to look at how to get carbon out of the atmosphere.
There are 100 initiatives in this project, ranked by how much each impact can have. Interestingly, in the top 10, the real estate industry can play its part through reducing refrigerant management and thinking about rooftop solar. It's not actually until you get to numbers 79 and 80 that they start to mention refurbishing buildings and net zero buildings. The point I'm trying to make is that we can have massive impact across the portfolio without re-engineering everything we do. You'll be pleased to know not all of it has to be very expensive. LED lighting, smart meters, walkable cities, and green roofs all contribute to decarbonizing the atmosphere. We try to think more holistically about our impact and where we can invest that's both at building and neighborhood scale.
The initiatives on this slide are all the ways the built environment sector can play its part. Rightly, there's a drive across the industry to get to net zero carbon in real estate. In reality, it's really difficult to achieve given that we mostly build out of concrete, glass, and steel. BL has been a pioneer in acquiring our first timber and steel building. Timber or cross-laminated timber is seen as a key resource in decarbonizing buildings, and the fire risks have been engineered out. It's also cleaner and faster to build. Orsman Road was bought for Storey and is designed by Waugh Thistleton, globally recognized as leaders in cross-laminated timber buildings. Beyond decarbonizing at materials level, we look at our impact at neighborhood level. Broadgate has been leading this for a long time, having delivered just over 1.6 million sq ft of BREEAM-rated buildings.
They've saved 3 million liters of water and delivered just shy of 20,000 feet of green roofs, which contribute both to biodiversity and insulation. In fact, somewhat amazingly, they've sent nothing to landfill for the last seven years. These are really easy stats to read and profoundly hard things to achieve. The team have been dedicated for a really long time in reducing our impact. Sustainability isn't new to us at British Land. Elsewhere in the portfolio, over at One Triton Square at Regent's Place, closer to my heart, we've approached the portfolio with the principle of reducing, reusing, and recycling at building scale. Retaining cores of buildings leads to an average carbon saving of 30%-50% over a new build. The team are really proud to be delivering our first BREEAM outstanding building.
Building in this way is saving the equivalent of 26 years' worth of operation of the building. At Regent's Place, we didn't stop there. Sometimes sustainability is about the things that you don't do. In redesigning landscaping, we refused to replace stone with imports from China, instead retaining all that could be and minimizing imports. Planting over there is to be drought resistant to reduce water consumption, and trees are being retained. They play a significant role in urban cooling, which will be needed. We retain trees and plant more wherever we can. The landscaping includes edibles, partly to reduce bringing in fresh produce to the city, but also is freely available to customers in the wider community, including those who are in food poverty. Mike mentioned 338 Euston Road, where we inherited fit-out from Facebook.
We've been working with a circular economy furniture provider who've restored all of the fit-out that could be upcycled and employed local people on site to upgrade what we inherited. This created jobs, reduced waste to landfill, and reduced transport. I know you'll be pleased to know it's financially sustainable, too. Approaching fit-out in this way saved us GBP 70,000 and 12 tons of carbon. Furniture accounts for 30% of buildings' embodied carbon emissions over the life of a building. What couldn't be retained at 338 is being upcycled into our first 100% U.K. sustainably sourced cafe and marketing space. This space is to be used by the wider community and has been an event and gallery space, a role it will continue to play once completed in quarter four this year. Materials used here range from recycled yogurt pots to crushed TV and mobile phone screens and recycled paint.
It's another example of how we're trying to demonstrate leadership and tread lighter while giving back to our communities. On the subject of communities, here you are in Clubspace. What you may not have noticed is the bamboo furniture as you came in. The team procured this deliberately as it's one of the fastest growing and sustainable materials on the planet and was a way to introduce this to our customers. Buying in this way supports forestry management and artisan producers in tropical forested areas. It shows our thinking extends to considering our impact across the planet, not just what's in front of us, and we'll continue to explore this. I hope that this has given you a snapshot into the diversity of ways we strive to reduce our impact in really practical ways. Our thinking is systemic at neighborhood, asset, and fit-out scale.
Whilst we look to reduce our footprint, we also look at the ways we can have social impact, too. The communities team do outstanding work on creating social capital for our business, which translates to very tangible value in terms of planning consents, political relations, and they're deeply embedded in the communities we serve. Whilst there is a sustainability team, the mindset is pervasive and has been for a long time. Doing good work with low impact motivates us and is a driver for our customers, many of whom are challenging us to see how far we can take this agenda. We'll keep challenging ourselves to see how light we can make our footprint and how well we can impact those communities. I mentioned sustainability and my worry about yours.
Can I invite you, if you have questions for us, to find those of us over a cup of tea in the next 15 minutes? I know the data and insights team are demonstrating their technologies. The time now is completely invisible. Can I invite you back in 15 minutes? Thank you.
The first element really is buy and sell decisions. You can see that since 2015, we've been net sellers to the tune of GBP 3 billion. That breaks down into GBP 4 billion of disposals and GBP 1 billion of acquisitions. With those disposals, we've locked in some very attractive returns, as you can see from the screen. It's easy with the high-profile transactions shown there to forget that we've sold over 130 retail assets over that period. We've generated proceeds of GBP 2.2 billion, and those disposals have been in line with book value. We've been thoughtful as to how we've used the proceeds from our disposals. One of the ways, as Chris touched on, has been to reduce leverage. Our LTV has come down from 35% in 2015 to 28% today. LTV isn't the only measure of leverage we look at.
It can be distorted by what's happening to valuations, particularly if there's yield shift. We also look at the absolute amount of net debt in the business. This has come down from GBP 4.9 billion to GBP 3.5 billion. Another measure is net debt to net rents. That was 8.5 times in 2015. It's 6.5 times today. The balance sheet is in great shape. We've not only used those proceeds to reduce leverage, we've also used them for value-accretive opportunities, primarily developments and share buybacks. We're investing in our campuses with our development activity. It's a core part of BL's DNA, and since 2007, it's delivered GBP 1.7 billion of development profits. We're on site with 1.3 million sq ft today, and our near-term pipeline includes the exciting opportunities at Norton Folgate, opposite from Broadgate, and also One and Two Broadgate.
If you take our near term and committed together, we expect these to deliver a further GBP 300 million of profits and a 6% yield on cost. Importantly, as you heard from Darren, we're 85% pre-let on our committed developments. That's important because it locks in income, which will underpin the dividend in future years. In terms of medium-term opportunities, we have a further 7 million sq ft of opportunity, and over 90% of that is at mixed-use places. That's Canada Water, Broadgate, and Paddington. We're holding our sites at relatively low value, and many are income producing. That gives us important optionality as to when we progress. Clearly, the biggest opportunity is at Canada Water, and you'll hear more about this from Emma and Roger in the breakout session. The third way we're using proceeds is buybacks. Importantly, we're not leveraging up to buy back shares.
Each buyback has been linked to a particular property disposal. For us, it's about exploiting an arbitrage. It's an arbitrage between the price at which we're selling assets and the implied level we're reinvesting in our portfolio via the buybacks. We've bought back GBP 625 million worth of shares over the last two and a half years. Because we're exploiting an arbitrage, we've locked in an increase in NAV of over GBP 0.30, and the look-through property yield on those purchases is around 6%. There are a number of things we have to consider with buybacks, and one of those is we've been clear we want to maintain the firepower so we can take advantage of that development pipeline. We also have an ambition to increase our exposure to our mixed-use assets.
Clearly, if we sell retail properties and reinvest in our campuses with developments, we move our weighting more than if we buy back stock. The third item is not really an issue today, but we've just got to be cognizant of it. If we sell properties and buy back stock, we shrink the company, and at some point, we could face potential diseconomies of scale. Overall, in relation to capital allocation, we've locked in some great returns, and we've put the balance sheet in a very strong position. That means we can take advantage of our medium and near-term opportunities. Changing tack slightly. In terms of the retail operational market, retailers are facing a near perfect storm. Many people are obviously aware of this. There's been high-profile store closure programs, CVAs, and administrations.
Demand is weaker, and that's having an impact on rents and values. To be clear, we expect it to remain tough for some time. Our working assumption is that rents are going to remain under pressure for the next couple of years. Against that backdrop, the team continued to put in a very strong operational performance, and you can see that in terms of our occupancy. Our occupancies remained high at 97%, and that's as at June. We've leased very well since year-end with over 500,000 square foot of leasing activity, and that's 3% ahead of ERV. I know, like us, you're interested in how that compares to previous passing rent. If we look at our long-term and temporary deals combined, we're 2% ahead of previous passing rent.
There's a wide range in there, and you can see it, because if you look at the long-term deals, they're 18% ahead of previous passing rent. We're leasing for an average term of 7.4 years, and our incentives have been stable at seven months. On certain of our assets, we've got to be pragmatic, and we're entering into some shorter-term deals to get in the right type of occupiers. If you look at the temporary lettings, they're 23% below previous passing rent. Importantly, we're not giving any incentives. When you look on a net effective basis, that discount is smaller. Our approach is to make sure that our portfolio is full with the right type of occupiers. You can see the benefits of this in terms of footfall.
It's been marginally down over the last 18 months. There's massive outperformance compared with the market. It's the same if we look for like-for-like sales. At year-end, I mentioned that in Q4, our like-for-like sales turned positive. That was the first time in two years that had happened. It's continued into this financial year. Again, you can see the striking outperformance relative to the market.
I'm Brona McKeown, and my role at BL is of General Counsel and Company Secretary, which makes me a lawyer and makes me someone who spent an awful of the last 18 months working on CVAs. Like all good stories, let's start at the beginning. CVAs aren't new. They were born over 30 years ago with the Insolvency Act 1986. For people who follow this, the generally regarded grandfather of so-called landlord targeted CVAs was JJB, first time around, back in 2009. That CVA affected landlords but left other creditors unimpaired. It was also the first CVA that set the trend where the calculation of landlords' votes for the purpose of passing votes at a CVA creditors meeting were discounted by 75%.
Somebody other than me has worked out that apparently there's been 40 retail-led landlord targeted CVAs since JJB. What I counted up was the run rate for the 4 years ending in 2017. The key point was it was pretty minimal, a few a year. That all changed when we got into 2018. By my calculations, 2018 alone tallied up about 14 CVAs. We at BL decided that we needed to react to this somewhat changing phenomena, tsunami, however you want to put it. If you take nothing else out of my five minutes or so, the key message is that BL was not passive in the face of changing times. What was different about the CVAs that came forward in the first half of 2018 was that they affected more than rent and more than store closures, significant as those are.
What they were doing was altering much more of the other aspects of the fundamental covenant and contract between landlords and tenants. We at BL evolved, if you like, a six-pronged strategy to deal with this. The first thing we did was we got very systematic about getting top-notch legal advice as each CVA came forward. We assessed it very quickly because the time period to assess these documents is pretty short and they're voluminous. We assessed where they were attacking various elements of landlord-tenant covenant, whether that was appropriate, and where they figured against the test for what's legally challengeable or not. We got match fit within BL. We put together a steering committee. I represented the legal aspects. We had people from finance, from retail leasing, and you'll hear from Ben Grose in one of the breakouts later on.
Communications, because there was a lot of noise in the press about this new phenomena. We assessed each and every CVA as it came forward. We took various things into account. If we consider that there were opportunistic features of the structure. If we thought they crossed into the line of unfair prejudice for landlords, which is one of the grounds for challenge, then we would vote against in the meeting and we would reserve our right to challenge. We decided there wasn't much point in having that kind of strategy if the people promoting these schemes didn't know about it. We proactively engaged with the insolvency practitioners who are very heavily involved in this market, and we went and met them and we talked them through our thinking and we talked them through what we were seeing, and we were very clear.
We essentially said, "Look, if you bring forward CVAs with these kind of profiles, expect us not to be happy about it." Having talked to the insolvency practitioners, I am up to three strands for our strategy, the fourth was to engage the wider market and through the insolvency committee, which has representatives from lots of landlords and various practitioners from the insolvency world, and is part of the infrastructure of the British Property Federation. We came up with what we call the 10 red flags. All that great legal advice that we had got, we boiled it down to 10 features of CVAs, and we called these the red flags. We pushed these out. You can find them on the BPF website. We pushed these out to the market, and the message that we were trying to get across was, we thought these crossed the line.
We thought that they were features that were unfairly prejudicial to landlords. Essentially what we were saying is, if a CVA is promoted with lots of these features, expect landlords to be pretty unhappy about them. I'm up to four. There's not a lot of case law in recent years about what's fair in a CVA and what's not. BL joined together with three other landlords, and we launched a legal challenge against a CVA, brought forward by the Regis business, which is a hairdressing business. A legal challenge is, as you'd expect, active litigation, so I'm not going to get into a great deal of detail. Safe to say that the features of that challenge look at both sides of the grounds that you can legally challenge a CVA. Number one, the practicalities of the process by which it's brought forward.
We think that CVA has features to do with prior structuring and restructuring of the organization that should have been brought out further in the process. Secondly, the CVA has features that we would say are unfairly prejudicial to landlords. We've had five strands of a strategy. At the back end of last year, we began to work on a sixth, which was to look at how, from as a matter of legal technology, a group of landlords could form together, and come together to form a steering committee in the context of these very multifaceted, large-scale restructurings. It's been very common in the bondholders market across all sectors forever, basically, to have steering committees. The technology's not new, but it is new and exciting to landlords.
We worked together with other landlords and legal advisors and a third-party advisor to work out how that could be structured. Where we were coming from was, if there's a large-scale restructuring and there's a table at which there's a pension trustee and there's bondholders and there are banks, and there might well be a single or majority shareholder, then there should be a seat at that table early doors in the restructuring for the landlords. That was our thinking. Because the table tends to be where the restructuring cake is divided, and if you're not at the table, the cake's all gone and you're left with the crumbs. That was where we were thinking we wanted to move some market practice, and you saw that deployed in Arcadia.
The results of that were that through a third party, safe black box, if you like, there was greater access and verification of an underlying business plan than landlords had ever had access to before, and there were concessions gained that benefited the whole landlord community, not just those who were part of the SteerCo. Underlying all of this, like a stick of rock, is continued communication with the customers, and you'll hear that coming through loud and clear today and also in the retail breakout session. Continually talking to our customers, saying, "What's going on with you? Are you in difficulty? Talk to us. Don't spring something like this on us. Let's work with you and talk about it." This next slide's really busy, and don't worry, I'm not going to take you through it because that would take half an hour. Focus on the colors.
Now, this is my color scheme, and this is my completely subjective assessment of where some of the features of CVAs have moved in the last year. I've taken the top 10 BPF red flags, and in time-honored fashion, I've dialed it up to 11 with my own 11th. The point is that if you look at the trends, you'll see that there's some green on there. Now, the green are features that we would have seen asked for a year ago and now either aren't asked for at all or with a bit of very light challenge tend to be conceded. I'm not going to sugarcoat this. There's red on there as well, and we still see on each and every CVA a desire on the part of tenants to have maximum flexibility on break rights, just in case.
We also see an unwillingness to give landlords the same mirrored flexibility, and that tends to be a recurring source of, how was it Chris put it, frank exchange of views when these things come forward. Trends of very, very recent CVAs are beginning to see some improvement. I wouldn't like to give you the impression that this kind of color spectrum of movement towards a more middle ground is where CVAs as they come forward start out. It's not. This is where they end up at the end of a great deal of discussion, negotiation, exchange of views, and frankly, lots and lots of hard work.
Okay, I spoke briefly about our current operational retail metrics. I just wanted to share a few thoughts on a longer-term view. The key question is where do we go from here? There will be a range of potential outcomes but for us, two key important factors are going to be affordability, and importantly, the potential to get growth in trading densities. Starting with affordability, a lot of focus on this. You can see from the chart, we've got our occupancy cost ratio and our rent to sales ratio. We're at the competitive end of the market. This is important. It means that the vast majority of our retailers trade profitably at our locations. That's due to the nature of our assets, the trading densities they achieve, but also our tight focus on service charge cost. We start from a position of relative affordability.
What's the outlook for trading density growth? We thought it would be useful to share with you the long-term framework we use in the business. It's high level, but it hopefully gives you an insight into how we're thinking about the key drivers. If we look at physical retail sales trajectory, clearly, the key drivers of that are going to be what's happening to total sales and the growth rate there, and then how much of that is going online. For us, we focus more on trading density. These are linked by what's happening to floor space. We think this is the factor that's going to change most compared to history. For many years in the U.K., we added retail space. Over the last two years, this has reversed. We think this will continue.
Virtually no new schemes are due to be delivered, and we're all aware of centers closing or being repurposed. Let's look at some numbers. In this framework, we focus on ranges as opposed to a central forecast, given we're looking into the future and the inherent uncertainties there. On the left-hand side, we use pessimistic inputs. On the right-hand side is more optimistic inputs. The first element is total sales growth. Over the last 10 years, total sales have grown by 3.3%, and you can see there's a range of forecasts there. Interestingly, the lowest we could find was Euromonitor at 2.6%. We're using a range of 2.5%-4.5%. The next element is online penetration. It's 19% today. Most forecasts are that this will stabilize around 35% or 40%. Using 50% at the pessimistic end seems prudent to us.
If you put these together, it gives you a growth rate range for physical sales, minus 2% to plus 2%. Our view is that effectively, online will absorb most of the growth in total sales, and that's certainly what we've seen recently. As I mentioned, for us, it's really important to look at what's happening to trading densities, and so we need to see what's happening to floor space. Last year in the U.K., there were 7,500 store closures. That's a net number, net closures. JLL are forecasting that over the next seven years, floor space will shrink by 1% per annum. In terms of the change in floor space, we're using a range of 1%-2% of shrinkage. If you overlay that gives a range for industry trading densities of minus 1% to plus 4%.
We've got a long track record, as I showed, of outperforming on like-for-like sales. Our average outperformance over the last four years is 190 basis points. We think we can continue this going forward because it's driven by our asset management capability and with careful asset selection. Overlaying this gives a range for BL trading density growth of +1% to +6%. It's a really wide range, granted, but what's important to me is that with relatively pessimistic assumptions, the bottom of that range is positive. Overall, the view is that online will absorb most of total sales growth, but floor space will shrink and the BL portfolio will continue to outperform.
We do expect it to remain tough for the next couple of years, but we do believe our same store sales will grow, and there's clearly value from the store, incremental value to retailers, from click and collect, return handling, and other fulfillment options. We start from a position of affordability. With continued careful asset selection, we believe our portfolio will succeed in the long run. Before we go into breakout, I just wanted to share a couple of data points with you. In the run-up to this event, a number of you asked how the retail capital values of our portfolio, implied by the share price, compare to replacement cost. We put together the following table. There's clearly going to be a range of views as to how much of the discount relates to retail, how much to offices.
What we've done is, on the left-hand side, assumed the discount applies equally to retail and offices, and on the right-hand side, we've put all of the discount onto retail. This gives you a range for the implied retail net initial yield of 7%-12%. Then for retail capital values that are implied, from GBP 310 per square foot to GBP 180 per square foot. To put this in context, our replacement cost in retail is GBP 200 per square foot today. I think this is quite striking in the context of our current operational performance.