Right. Morning, everybody. Welcome, welcome. Thank you so much for joining us on this rainy day. Maybe you got here by Crossrail, who knows? If you haven't, you need to try it. It's great. It works very well. What we're gonna do is give you a brief intro in a second, but I wanna start by just reminding you what I said at our finals in May. I talked then about weakening near-term prospects in London's economy and its property markets, but a strengthening conviction in its longer term attractions. Now, much has happened since then, but our principal messages to you today remain the same. Near-term challenges, yes, but as you'll hear, our portfolio positioning and balance sheet strength will enable us to turn them to our advantage.
Longer term, London's broad and enduring appeal to both people and businesses will continue to fuel its growth. Over the next few slides, Nick and I are gonna give you the main messages from the results, provide some evidence to support our positive conviction, looking at new business, the market, a broader business update, and finishing with our outlook. We're then gonna open it up to you, and we have much of the Executive Committee here on-hand to answer any questions that you have. You can also submit questions online with the email address shown on the page over there. Let's kick off then with the headlines of these solid results.
Portfolio valuation was down 3.4% in the first half, yet our ERVs were up by 0.7%, meaning that pretty much all of the correction was the result of yields moving out. Our NTA was down 4.9%. Meanwhile, our balance sheet is even stronger than it was in May. LTV is down to 17.8%, and we have immediate liquidity available of almost GBP 500 million . Before I summarize our operating performance, I wanna give you a quick reminder of how we've evolved our strategy for changing conditions, and in particular, to meet customers' needs, whilst at the same time, maintaining the foundations of our strategy that have made it so successful over numerous cycles. You'll recognize the strategic givens shown here. 100% Central London, repositioning properties, matching risk to the cycle.
As you can see on the right, our long-term track record is good. Net buyer in weaker markets up to 2014, massive net sellers since then as we delivered business plans into stronger markets. As conditions in the near-term become more challenging, we've been here before, we know how to take advantage, and we can, because we always run low leverage alongside a disciplined approach to capital management with a strong commitment to sustainability and our customer-first approach, matching our products to their needs, and in so doing, accessing the deepest pools of demand. In office, two complementary and overlapping products, HQ spaces, larger, best in class with longer occupancy, and Flex spaces, also best in class, whole floors of smaller buildings fitted and serviced by us.
Within all our spaces, we're offering them a clear choice of different solutions that are either Ready to Fit, Fitted, Fully Managed, or delivered through one of our partnerships. We've created a differentiated growth strategy which plays to our strengths and will deliver significant extra relative return for little additional risk. We're seeing the benefits of this refined strategy across our business, which is operating well from a position of strength and with lots of opportunity. First, seven months in, and we've already delivered another record leasing year. GBP 16.7 million signed in the first half, beating ERVs by 4.4%. GBP 27.4 million since the end of September, also ahead of ERV, including our largest ever letting, pre-leasing 100% of the office space at our 2 Aldermanbury Square development to Magic Circle law firm Clifford Chance.
With a further GBP 6.6 million under offer, we can expect our vacancy rate to continue its downward journey, particularly given that 79% of our available space is prime. My message here is that if you create great spaces with a compelling service offer to customers, you're gonna lease it, and you are going to lease it well. Second, we're making great progress in creating more of these spaces through our significant organic and new business opportunity with a total CapEx program across 13 major projects covering 1.5 million ft or 50% of our existing portfolio. In our HQ repositioning activities, we're working on nine schemes, all targeting net zero carbon, five of which are on-site or near-term projects where we'll invest circa GBP 0.9 billion of CapEx.
In our Flex operations, our ambition is to grow from 15% of our offices today to at least 26% by 2027 just from our existing portfolio. Having already bought two great assets this year with a further GBP 0.9 billion of deals under review, we expect our new business team to add more through acquisitions, as you'll hear from Nick in a minute. Third, with our financial strength and absolute given built on our low LTV, low and fixed cost debt, plus plentiful liquidity, we have significant capacity to exploit this opportunity with no maturities for 18 months, drawing on funds under our ESG-linked RCF. We are in a strong position with a clear and differentiated strategy that will move the needle. With material income and value growth potential. With enhanced operating capabilities and a senior team with deep experience across multiple cycles.
All of which is supported by great balance sheet strength. Plus, we remain passionate believers in our capital city's prospects, as I'll talk about in a minute. First of all, over to Nick to look at the results in more detail.
Thank you, Toby. Good morning, everyone. I'll take you through the details of our valuation and financial performance. I'll also cover our further strengthened balance sheet with extensive capacity for investment, both organically and through acquisitions. Starting with the numbers. The group's property portfolio stands at more than GBP 2.6 billion, down 3.4% on a like-for-like basis. EPRA NTA fell 4.9%, while NDV fell only 1%, given our attractively priced debt book. Following the sale of 50 Finsbury Square, pro forma EPRA LTV has reduced to 17.8%. As expected, EPRA earnings fell to GBP 11.4 million, taking EPRA EPS to GBP 0.045. With our strong financial position, we are paying an interim dividend of GBP 0.047. Overall, our total accounting return was -4%.
Now let's look at the 3.4% property valuation decline. As you can see, retail fell less than offices, although our Flex office space was the strongest relative performer, down only 1.4%, supported by positive ERV growth of 3.3%. Overall, portfolio ERVs were up 0.7%. With EPC improvement costs fully factored into the valuation, our A and B-rated spaces outperformed on a relative basis, and we expect this trend to continue. As you can see in the table, the main driver of the valuation fall was yield expansion of 15 basis points. As shown bottom left, our topped up initial yield today is 3.9%, rising to 5.3% on a reversionary basis.
We show top right the portfolio breakdown with nearly three-quarters laden with development and active management potential, whilst our long-dated properties are all prime West End with exceptional recycling opportunities. Bottom right, the green bars show the values across the portfolio fell in the period. On a three-year view, our committed development of 50 Finsbury Square was the star performer, up 18%. As you would expect, our development pipeline has underperformed, given the necessary characteristics of short income, poor EPC ratings, and their frequently short leasehold nature. However, they provide an attractive basis from which we can deliver healthy organic returns as we create prime, modern, sustainable spaces. Turning to EPRA NTA, which fell 4.9%, predominantly driven by the property valuation decline of GBP 0.39 per share. EPRA earnings added GBP 0.05, whilst last year's final dividend reduced NTA by GBP 0.08.
With other items, NTA stands at GBP 7.94. Moving to EPRA earnings, where we guided to a decline, although I'll show you that we had some ups and some downs on the prior comparator period. Rental income was up GBP 4.9 million, and we've returned to our pre-COVID track record collection rate of 100% within seven days. Both JV fees and earnings fell, given the prior period sale of our income-producing redevelopment at Old Street, along with the one-off surrender premium at Regent Street. Property costs fell GBP 0.4 million, while admin costs increased by GBP 1.4 million, given our investment in enhancing our customer-first capabilities, digitizing our activities, and investing in our people.
With higher interest costs and other movements of GBP 1.5 million, overall earnings were GBP 11.4 m illion, resulting in EPRA EPS of GBP 4.5 . We expect H2 EPS to be broadly in line with H1, and we are paying an interim dividend of GBP 4.7 , consistent with the prior year and reflecting our financial strength. On which note, shown top left, EPRA LTV has reduced to 17.8% and remains one of the very lowest in the U.K. REIT sector. We continue to operate with significant debt covenant headroom, including the ability to withstand further value falls of 62% , and our ICR position is strong at 15.8x . Our weighted average debt maturity is just under seven years, with no maturities in the next 18 months.
You'll find more details on our well-laddered debt book in the appendices, with 98% of our total facilities on a flexible, unsecured basis. Our available liquidity is nearly GBP 500 million. The weighted average interest rate on our drawn debt is only 2.7% and is 100% at fixed rates. Finally, the interest rate on our undrawn floating rate RCF is 3.1%. You can see bottom right that as we draw on this GBP 450 million RCF, our weighted average interest rate nudges up from 2.7%-2.9%, all else equal. We also show the sensitivity to any further moves in underlying SONIA rates.
Moving to our organic growth opportunity, which has never been bigger, with around GBP 1.1 billion of total prospective CapEx into a supply-constrained prime office market, which Toby will cover in more detail shortly. The largest chunk will go into our four upcoming office-dominated HQ repositioning schemes, including the recently committed and pre-let to Aldermanbury Square. These four schemes will deliver prospective ERV of GBP 72.8 million, a six-fold uplift on the current rent roll. As we continue to grow our Flex space offer, we currently have GBP 130 million of prospective CapEx. The majority of this is into four dedicated, Fully Managed buildings and include our recent acquisitions at St. Andrew Street and Gresse Street.
We expect these four buildings of more than 150,000 sq ft to deliver a rent premium of 66% and a yield on cost of 6%. With these plans, we are on track to deliver 650,000 sq ft of Flex space by 2027. Finally, there's around GBP 15 million of other upcoming refurb CapEx across the portfolio. Taken together, this prospective CapEx over the next five years or so would take indicative pro forma LTV to around 40%. Remember, that's before factoring in prospective sales and development surpluses, and we remain committed to our through-the-cycle LTV range of 10%-35%. This CapEx will enable the delivery of our significant organic rent roll growth opportunity with a potential uplift of GBP 91 million.
Starting from today's rent roll of GBP 109.7 million, up 5% in the six months, leasing our void in refurb space will add GBP 16.4 million of rent, more than 75% of which will be delivered as Flex space, and we have another GBP 6.1 million available through reversion capture. Beyond the existing GBP 21.3 million of lettings at our three recently completed developments, there's another GBP 6.6 million available, more than 30% of which is under offer. As shown in green, you can see the additional GBP 62 million of rent to come at our committed and pipeline schemes, of which GBP 25 million is already pre-let. Overall, this gives a total potential uplift of 83%.
Beyond this, our CapEx phasing means that we have the opportunity to add to this organic growth through acquisitions. With our disciplined approach, we've made GBP 37 million of acquisitions since the start of the financial year, including our Flex opportunity at St. Andrew Street, along with a small acquisition on Cathedral Street, adjacent to our Minerva House development. Since our full-year results, of the GBP 750 million of properties which we had under detailed review and subsequently sold or went under offer, 3/4 traded at above 10% of our view of fair value. There's been a clear change in the investment market sentiment since the summer. We've seen a start to asset repricing given interest rate moves. Whilst there's no immediate distress evident, motivated sellers are emerging.
For those with impending debt refinancing needs, new debt supply has reduced, and ICR is likely to be the key driver of new funding levels. That being said, for the very best assets, rental growth opportunities and sterling depreciation are providing some yield support. In the meantime, we're starting to see value emerge for the kind of assets that we like to buy. Our deal flow remains good with more than GBP 900 million currently under review, predominantly off-market. They play into our strategic focus on Flex and HQ repositioning, including potential purchases of sustainability stranded assets. As ever, we're exploring joint ventures, and as we move into the new year, we expect to uncover more acquisition opportunities. Now, a quick update on our social impact strategy, which you'll recall I talked about a year ago on launch. Our recent community day cemented our new charity partnership with XLP.
We're working hard to make our spaces more accessible and inclusive, whilst we're also making our business and our teams more inclusive, too. As ever, we're collaborating with and delivering for our customers. We've now created more than GBP 1.5 million of social value and are on track to meet our target of more than GBP 10 million by 2030, so more to come here, too. Now to wrap up from me. NTA per share declined due to yield expansion, although our Flex and EPC-rated A/B space is relatively outperformed. We're pleased to have maintained both the level of our ordinary dividend and our sector-leading debt metrics, enhanced by our continued recycling discipline. Our debt position is strong with no near-term maturities, and a blend of low-coupon unsecured facilities gives us significant capacity for investment.
We have an extensive organic growth opportunity with prospective CapEx of more than GBP 1 billion into both HQ repositioning and Flex refurbishments, and we expect further acquisition opportunities to emerge, too. Overall, GPE is in great financial shape, and now back to Toby for a few comments on the market.
Thanks, Nick. Let's turn then to look at conditions in our markets. Whilst it's clear that we are experiencing a downturn, it's not at all clear that it will affect all markets equally. Central London feels much busier than even earlier this year, and we're seeing healthy demand from businesses looking to trade up to spaces that are fit to meet their future working patterns. As we've shown, customers are increasingly favoring the best sustainable spaces which are leasing well today. Plus, we think London's economic fundamentals look increasingly compelling. Its population is growing. Barriers to entry are rising through both the planning system and sustainability, all of which are serving to move the supply-demand equation in our favor, and these are all themes that play to our strengths. Looking then at these themes and starting top right.
Whilst PMIs for both London jobs and business activity are falling, looking forward, Oxford Economics expect more than 140,000 new jobs to be created by 2027. That's about 15 million sq ft of new demand. They also expect London's GVA to grow over the next three years and by more than the U.K. overall, as you can see in the table. This medium-term optimism is borne out by the leasing stats shown bottom left. November's active demand total remains ahead of the 10-year average. Last six months take up, shown in the middle, is also running ahead of last year, with space under offer right now comfortably ahead. How is it, you might ask, that with the macro commentary so consistently miserable, I'm able to show you numbers, current numbers, ahead of the long-run average?
For that matter, pull off our largest ever letting in such conditions. It's because businesses today are looking through current conditions and acquiring new spaces, quality spaces, that they calculate will meet the future needs of their people. In the post-pandemic world, this theme has never been more important. In fact, new space, shown by the green bars bottom right, is letting quicker than at any point in the last 20 years. So far this year, new developments have reached 75% leased on average 12 months ahead of practical completion. Our own experience, as you've seen, bears this out. Turning to supply, and we have been warning of a shortage of Grade A deliveries in Central London for years. Our projections today, shown in the table, point to the most extreme shortage we have seen so far.
With 2.5 million ft of speculative space completing annually between now and December 2025, compared to a 10-year average lease up of 4.8 million ft annually, we put that shortage at more than 90%. It's no surprise then that PMA believe that Grade A rents are both relatively defensive today and should resume their growth trajectory, as you can see by the blue West End and the yellow City lines bottom left. Because of the critical supply shortage, by the end of this period we think there is a real possibility that their estimates could prove to be very conservative. With 68% of our book in the West End and 93% near an Elizabeth line station, we're well set to benefit.
Turning to the investment market, and as we all know, the cost of debt, shown by the blue line, has jumped over the last few months, and it's clearly putting upward pressure on yields, with City prime having backed up by circa 50 basis points so far this year. If you look at a 50-year picture as shown here, this recent reemergence of a negative spread between property yields and funding costs is actually a reversion to the long-term norm. What's my point? Well, it is to remember that a negative spread doesn't automatically mean value declines. In fact, as the yellow line shows, there have been numerous periods when a negative spread coincided with strong value growth. Much of the 1980s, for example, and for the majority of my career since the early 1990s.
As some values correct, we're on the hunt, as you heard from Nick earlier, and we have good deal flow, and we are certainly seeing more value. To sum up then on our view on the London markets. Weaker conditions in the near-term have impaired some of the drivers for office rents, such as GDP growth, confidence levels, and therefore business investment. By contrast, the medium-term picture will be supported by low prime vacancy rates and the shortage of development completions. Looking at our own portfolio, shown bottom left, the middle column shows we delivered rental growth of 0.7% across the portfolio in the first half, with offices up 1%.
Now, given this run rate, we've slightly reduced our upper end of the range expectations, but we still expect rental growth for the year overall of between 0% and 2.5%, with offices likely to outperform retail. For yields, the picture is also slightly weaker than in May, and as you can see at the bottom, we expect upward pressure on all yields, but with an increasing difference between prime and secondary. Longer term, the best will strongly outperform the rest. Next, I want to give you a brief operational update and some more color on our strong leasing since March and our successes in delivering Flex growth.
In retail, we've worked hard to continue the positive momentum we reported in May, leasing for 5.6 million and making good progress on our recently completed Bond and Oxford Street units, where we are now 100% let or under offer. Across our HQ repositioning activities, we signed GBP 31 million , including our record-breaking pre-let to Clifford Chance and beating ERVs by 2.7%. And finally, in Flex, we leased 7.5 million, beating our Flex ERVs by 10.1% overall, or by 11.3% in our Fully Managed spaces. And Flex ERVs are growing faster than the rest of the portfolio, up 3.3% in half one. Now, don't forget, these are not leases of desks or rooms on a weekly or monthly basis.
They are leases of whole floors to proper businesses, the logos of some of which you can see top right, and on an average duration of 2.3 years. Not much shorter than we would typically secure on a small ready-to-fit deal. Plus, we're letting these spaces twice as fast for materially more, and so it's clear we're mining a rich seam of demand. They make money too, as you can see on the table top right. Take our Fully Managed deals. We target a net effect of rent beat versus ready-to-fit of at least 50%. We've delivered 81%. We target relative cash flow beats of 35%. We've delivered 52%. Where next? Well, given the returns on offer and the depth of customer demand, more growth.
Grow Flex from the existing 284,000 ft to circa 650 within our existing portfolio. Add to this through further acquisitions. We'll be working hard to build on our market-leading Net Promoter Score and implementing our EPC strategies well ahead of the 2030 deadline, as well as investing our decarbonization fund to improve the portfolio's energy efficiency, helping both our customers and the delivery of our net zero carbon roadmap. An income story then that is both defensive and has growth potential, giving a strong value upside. Talking of growth, let's have a quick look at our CapEx program, where we are building a significant development and refurb opportunity timed to deliver into both an economic recovery and supply shortage. We now have two schemes on site, 50 Finsbury about to finish and the pre-let Aldermanbury Square now committed.
Five major refurbishment projects, mostly for Flex, and a further six near and medium-term developments, bringing the total to 13 schemes covering 1.5 million ft or circa 50% of our portfolio. Focusing briefly on 50 Finsbury Square. This 129,000 sq ft project has exemplary sustainability credentials. The offices were fully pre-let, more than 11% ahead of the ERV. The retail is now 100% let or under offer, with the works due to complete before Christmas this year. As you've seen, just a few weeks ago, we sold the building to a private investor at a market-beating 3.85% yield and crystallizing our near 40% unlevered profit on cost. Turning to 2 Aldermanbury Square.
As you know, demolition has started enabling us to build this superb office building, which will be best-in-class in every way. We fully expect to beat our 2030 embodied carbon targets through, for example, pioneering the reuse of the existing building structural steel, both on-site and elsewhere in our program. We have appropriate allowances for inflation built into our cost plan. The building's quality, and particularly its sustainability credentials, has enabled us to pre-let 100% of the offices to Clifford Chance. We've secured a long lease at a good rent ahead of the ERV with a market rent-free, and we look forward to delivering returns that are healthy given how much of the commercial risk has now been closed out. Next up, we have a further three near-term developments, all prime, all with exemplary sustainability credentials.
Given that each is valued in their existing undeveloped state, they give us strong growth potential, particularly when you remember the supply shortage I referenced earlier. Good timing. Top left, New City Court is our largest project at circa 390,000 ft and almost 300% increase. Our planning process is now formalized, and we expect an outcome from the Secretary of State in the first half of 2023 with an anticipated start Q1 2024. At both French Railways House and Minerva House, the planning processes are proceeding, and we're anticipating starts towards the end of 2023. Taken together, our five on-site and near-term developments will deliver 1 million ft of Grade A space, an increase of more than 90% and 164% more rental income.
They'll all be best-in-class, net zero carbon and tech-enabled, all inherently pre-lettable. Total CapEx of GBP 0.9 billion will generate value too. At circa 45% of our net assets, this sizable near-term investment really will move the needle. Let's then sum up our activities and consider where next for GPE. Coming back to the chart, top left, we've sold well so far this year, and from here, our substantial CapEx program looks well-timed. The majority will be invested near-term, delivering into an economic recovery and generating strong income and value growth. We'll also be investing for more Flex growth. Bottom left, you can see our organic ambition, up circa 130% by 2027 before we make any further acquisitions.
With some value emerging, we expect to find attractive opportunities to buy, as well as delivering more sales of assets ahead of book value where we've completed our plans. This is a business with a clear operating direction mapped out, strongly focused on delivering for our customers first, with sustainability in everything we do, and always maintaining our capital allocation discipline. As we think about our sizable and exciting opportunity, this is also a business with clear strategic priorities centered on our Central London focus and our deep knowledge. We're evolving with two complementary business streams of HQ and Flex designed to deliver for customers' changing needs, both with great potential and giving us a compelling and differentiated strategy.
Whilst our markets in the near-term will be more challenging, we think medium- term, they are positive, with supportive employment indicators, good demand for prime spaces across both HQ and Flex, colliding with serious Grade A supply shortage, plus healthy long-term investor demand for prime assets. Whatever the near-term throws at us, we maintain our long-term belief in London. It's one of the world's most attractive mixed-use locations. It continues to act as a magnet for both industries and talent. Its best retail is improving from recent lows. Of course, the Elizabeth line is now open, positively impacting at least 90% of our portfolio. Plus, that portfolio is full of opportunity in HQ repositioning, where we really can move the needle.
In Flex, where deep customer demand will support our expansion plans, combining to deliver strong organic income growth potential, and in an investment market where opportunities are now emerging, all of which will be enabled by our strong balance sheet and by our powerful collaborative culture and our great team. We've restructured for our evolving customer needs and market conditions, but still with the same clear purpose and unifying values, supporting our communities and our people, and with an experienced senior team who've traded through multiple cycles. GPE is in great shape, well set to navigate short-term challenges and profit from longer-term opportunities, and no surprise then that we remain confident in our prospects. Right. That's the formal bit. As I say, we've got a spread of Executive Committee friends on the front row to help answer any questions that we may get.
We can take questions online. I think, Steven Mew , you're gonna be monitoring the ether to see what comes in and just hold your hand up if something interesting turns up. Holiday videos, whatever. Who has any questions they'd like to ask? Hemant. Microphone coming. There you go.
Good morning. Hemant Kotak from Kolytics. Very clear presentation. Thank you very much. When we look at the economic projections, and I don't think they're necessarily your projections, but if I'm reading it correctly, they're indicating a short and shallow downturn for London if there is one. Is that correct? Is that the basis when you talk about delivering into a recovery? Is that what you mean?
It's exactly what we mean, Hemant. I mean, we clearly are having the consequences of some of the disruption we've all felt over the last, well, frankly, since Brexit, arguably, but definitely since COVID. The unwinding of QE is in the mix as well, as we know. Financial markets correcting as they have. The point we're trying to make here is exactly as you've referenced, short-term challenges. You don't run a property company on a short-term. You never have. You cannot. You have to look at least three, if not seven years ahead. If you consider Hanover Square is a great example. We bought our first sites in Hanover Square in August 2006. We've only just finished it. You know, we acquired Aldermanbury Square, for example, in 2010, initially in joint venture.
We bought out our partners from that joint venture, and here we are in 2022, just committing to the development to finish in December, there or thereabouts, 2025. We necessarily have to look through some of these challenges. That's also why we love low leverage. It's why we have the lowest leverage in the sector. It's why we'll always have leverage towards the bottom of the sector because it gives us options to take advantage when exactly these sorts of conditions emerge.
That's great. That's very clear. In terms of then your acquisition opportunities, you've talked about your low leverage, and it gives you ample ability to go out and buy stuff. How are you thinking about that? What opportunities might present themselves given what you just described? How are you thinking about when you underwrite investments? Has your return criteria changed in the situation?
Okay. Sure. Nick, maybe you want to take the first part. Just while you're getting a microphone, on the second part, have our return criteria changed? I mean, fundamentally, our cost of capital has gone up a little bit, Hemant. For obvious reasons, the equity and debt cost have both moved recently. We look on a through the cycle basis, and so yes, they've gone up a little bit. Essentially, we're still looking to beat our cost of capital with a judicious quantity of leverage, but not too much. We expect to be able to do that, and clearly pricing helps. Nick, in terms of what we're looking at.
Yeah, I mean, we've always got anywhere between GBP 0.5 billion and GBP 1.5 billion of assets under review, potential acquisition. You can see they play strongly into the key themes of Flex, HQ repositioning, and we made a couple of Flex acquisitions already this calendar year. Where will the opportunities come from? I mean, at the moment, we're obviously seeing some motivated sellers, particularly through the U.K. funds. In fact, one of the acquisitions that we made, St. Andrew Street, was before there was that motivation to sell because of the changing interest rate environment. They were a motivated seller 'cause there was CapEx that was needed into that building. If they were to look at that today, I think they'd be even more motivated to sell it.
I think as we look forward over the course of the next year or so, do we think there'll be distress? I'm not so sure. I mean, there's clearly the London market is not a particularly levered market. Much less of the leverage that is in the market has come from the banks. More of it has come from the debt funds and the insurance companies who perhaps can take a slightly longer-term view. Where I really do see the opportunities where owners have got either refinancing needs, and they need to put in more capital, or they've just got spaces that is not fit for purpose for what the modern customer wants, whether that's sustainability, whether that's flexibility, whether that's tech enablement.
You know, the vendors are typically looking to do things off market. This is not a market where you go high, wide, and handsome. You go and try and find a purchaser that you know what they want. The market knows exactly what we're looking for. It's set out there. They know that we've got the capital, LTV sub- 18% and GBP 500 million of liquidity, and they know that when we say we're gonna deal, we will deal. As I say here, we think more opportunities will emerge through 2023. We have no urgency to buy with GBP 1.1 billion of prospective CapEx into the existing portfolio. If opportunities emerge, and those opportunities are gonna allow us to deliver commensurate returns above our cost of capital, we can do it.
Particularly when you think about the phasing of that CapEx, and it's over the next five to six years, so we can move immediately for the right opportunity should it emerge.
Thanks, Nick. Hemant, the only other thing I'd add to that is one of the things we've quite liked about being relatively small, and you've seen us giving back lots of capital over the last cycle, is that smaller deals move the needle. We don't have to buy huge quantities of larger transactions. We can move the needle with smaller transactions, which, given, you know, markets that are dislocated often struggle to find too much opportunity, is also valuable to us. Yeah.
Morning, it's Sam King from Stifel. Just one question please on pre-lets and thinking about it in the context of the supply shortage for new Grade A and then also looking at the terms of the Clifford Chance deal. Are you finding that you're having to offer more optionality and generous incentives in order to secure pre-lets of that scale and of that quality?
Marc, maybe you just wanna give us a comment on the Grade A shortage in a second and perhaps give some color to where that demand is coming from. In relation to Clifford Chance and the transaction itself and the terms of that transaction, actually, the market rent-free of in the 30s months on a 20-year term is about what it should be and is roughly what it's been all the way through the last cycle. We're not finding we're having to give much more. I think there might be a rent-free chart in the back somewhere that shows it's moved out a little bit, but not very much. The terms of the rent-free are broadly the same. Are we having to be more creative in terms that we offer to customers? Not really.
Actually, it's the building that does the talking and the services that we supply them and the counterparty that we represent doing what we say we're going to do, building and owning absolute best-in-class, always being there, proper balance sheet strength, and all the rest of it. They matter many times more, I would argue, than the finery around the exact terms. The other thing I would say, the conversations we had with our friends at Clifford Chance were deeply sustainability-focused from the off. That was absolutely central to them.
The way that this building represents their values to their people and their customers was super important, more than we've seen before, interestingly, which I think says a lot about Clifford Chance, but it also says a lot about our ability to create spaces like this in that environment, which we're really excited about. We think it's a huge opportunity. Going back to Nick's comment on acquisition opportunities in that space, that's exactly what we're looking for, places that we can create something really special. In relation to demand more broadly, Marc, have you got a microphone?
Is this working? Yeah. Hi. Certainly in terms of demand generally, active demand is now somewhere around 10.5 million sq ft, which is the highest it's been since Q1 2018. It is strong. In terms of whether occupiers are expanding or contracting, the majority are actually expanding. 45% are expanding, and 25% are staying the same. The majority are going in the upward trajectory than downward. Banking, finance, legal are definitely driving demand. Tech, as we know, is more subdued, certainly with the recent announcements of some redundancies in the States over some of the FAANG operators. The demand itself is quite evenly spread.
If you look at, I mean yourself, I mean, you've got a requirement out at the moment for 90,000 sq ft looking in the City. I mean, you're a classic example. Actually what we're seeing, even here, the LSE, they have recently regeared their lease or taken the break out of their lease because they can't find what it is they're looking for. There's a number of occupiers, financial occupiers that have done the same and bought themselves the additional five years to think about what's coming down the track.
Rich, if you go back to, I think slide 18 with the stat that Toby mentioned, if you look at the average supply of 2.5 million sq ft over the next four years, and the fundamental undersupply that you're getting there at 92%, that tells you all you really need to know about what's happening in the market today. If you look at the differential between structural demand of that 10.5 million, 79% is actually through lease expiries and breaks.
If you look at the cyclical demand, not only have you got, I think, Rich, I think it's the slide before in terms of the Oxford Economics forecast on jobs, top right as you're looking at it, actually, CBRE have run it through their own numbers, and they believe it's slightly higher. It's 177,000, which is 17 million of new demand. There's quite a lot that has been happening. In terms of jobs growth over the last 12 months, you've had something around 188,000 new jobs as well over the past year. There's quite a lot of demand out there.
Good stuff. Thanks, Marc. Sam, you heard it here first. You better get your order in quickly, I would say. Thank you. Who is next? Yes. I'll come to you, Os, then. Thank you.
Morning. Osmaan Malik, UBS. New City Court. I just wondered if a big part of the story on the development, and I think 46% of the near-term CapEx is on New City Court, but you still haven't got planning permission. It sounds like progress is being made. What can you say about how the risks around getting that planning permission? Are you more confident than you were, say, six months ago? What would be Plan B?
Plan B. Let me address Plan B, first of all. Andy, maybe you want to give an update on the planning and where we've got to and what happens next. Maybe just touch on the scheme very briefly because we haven't really talked to this community in much detail about it. Plan B, God forbid, which is not our base case, but is a very valid question. Plan B will be to look at the forward return of a different scheme and the existing asset. One of the things we do at GPE and have always done is sit down every quarter and review the prospective returns of every asset against what else we could do with that capital, right? We talk about discipline a lot. It's probably quite dull to you.
We've done it all these years, but it's really important to every quarter think about whether that pound tied up there is being used to its maximum efficiency. If not, we'll sell things, and we'll put that money elsewhere. Now, I'm not saying Plan B equals a sale because it's such a good site. We think there will always be a plan here that will work for the community around us and for the planning authorities and so on. We've actually got two planning applications in, both of which are in front of the Secretary of State. Andy, isn't that right?
Yeah. Morning, everyone. We've got two planning applications that are running at the moment. Is this one? Yeah. We've got a 2018 scheme that was submitted and then the 2021 scheme, which is the one you see behind me. Both of them were not determined by Southwark, so we actually appealed for non-determination. The appeal was held over the summer, three-week public inquiry. The inspector is busy writing her report at the moment. It is quite complicated because as well as the two applications, you've also got alongside it two listed building applications. She's actually got four complete planning applications she needs to consider.
She is due to issue her report to the Secretary of State in January, and then Michael Gove will take as long as he takes to issue his decision. We think it will be sort of May, June time next year. The scheme behind me there, that is actually 10 stories lower than the other scheme, but both are sort of net zero carbon exemplary credentials, as you would expect. Our view at the public inquiry is that both schemes should be approved, and that's what we hope the inspector will determine as well.
Thank you. Sorry, just one other quick one. I'm sure you've got a slide on it at the back in the extensive appendices. You made a point around your A/B EPC ratings outperforming the C/D. Could you just elaborate on the share of the portfolio that falls into each category and the plan to get the lower quality up to the top?
Yeah. Os, you're right. There is a slide in the back. But actually, if you go back to Nick's valuation slide, there's a little bar there that I think you do reference, but essentially that shows that the ABs have outperformed the BCs. T here you go, down 2.5 versus down 4.2 on the left in the middle. I s that satisfactory, or do you want more?
I didn't get a chance to digest the other slide. I think it's there. It's fine.
Yeah. 55% once you factor in the things that are currently on site will be A/B.
Thank you.
Thank you, Os. I think we had a question over here. Yeah.
Hi, Kieran Lee from Berenberg. Mine was just a follow-up from the acquisitions and financing point. Obviously, if you've got the potential development starts taking LTV as high as they are to make acquisitions, would you be looking to delay developments, or are you assuming that you can sell assets into market? At the same time, what is sort of potential to achieve good valuations whilst simultaneously achieving good pricing on new acquisitions? Perhaps also on the developments point, what are we seeing in regards to sort of construction cost inflation? Is that starting to come off? Looking at yields on cost, are you appraising a potential start on a spread above a market yield to maintain return, or is it just it is what it is?
Great questions, Kieran. Thank you. Andy, I'm gonna come to you in a second on the second of those, in particular around the inflation question. Rich, can we go to the where next for GPE slide, the one with the cycle chart on it, please? Because I think to your first question, do we delay developments? We do not delay developments. I mean, each and every one will be appraised on its commercial and expected return criteria when we get there. At the moment, given everything we've said about the supply/demand imbalance, it makes complete sense in our book to push on, especially if they're in great locations and Grade A product, as witness we just managed to do with Clifford Chance. We think we'll pre-lease quite a lot of them.
Now, to the second part of your question, if you look at this side of the chart over here, as to where does the capital come from, because as we say on that chart, through the cycle gearing 10%-35%, that gives you the clue as to where gearing will never go beyond. You can see here, massive net seller that I referenced right at the beginning. That's well north of a couple of billion pounds worth of sales, and we've evidenced again since the Liz Truss moment, that we can sell assets very well. Great assets have a market even today. I don't see any reason why that doesn't continue given the quality of what we own. We will wish to push on with developments.
We expect to finance ourselves through, firstly, our very low gearing, and secondly, continued sales of assets as we have all the way through the last cycle. In relation to development and inflation, first up.
Yeah. Thanks. Morning, Kieran. Rich, you've gone to the slide. This is the index of where the four leading cost consultants are. It's indexed, so it's quite difficult to see the numbers, but what they're saying for this year is they're now forecasting sort of 9% on average between them. Six months ago, that was about 5%. I think all of the things we know about are kinda baked into that construction number. I think as you sort of said, there are now a few upward pressures, so energy being one, but there are also downward pressures. Materials, for instance, are now starting to come off. Aluminum, the pricing of that is where it was about 12 months ago.
In the last quarter, rebar and structural steel has come off by about 10%. The interesting sort of good stat I have is how quickly the markets have adapted. Pre-Ukraine, for instance, we were big importers of Russian and Belarus rebar. Turkish imports of rebar are now up 285,000%. The market adapts really quickly. The other one is really sort of construction order books, and you're starting to see those potentially coming off a bit, which does exert downward influence on pricing. New orders were down sort of 10% in quarter two. PMI is below 50.
With some of the planning difficulties that we've talked about in relation to, say, New City Court, we're seeing other schemes also getting deferred in the planning system. I think you've got sort of two drivers down on materials and order books and sort of energy slightly pricing it up. That curve is actually flattening out. I think most of it is now baked into pricing.
Thanks, Andy. Really helpful. I would've been happy at 285%. Kieran, the other question you asked was around yield on cost. Prospectively, we always look at at least a sort of 12%-13%-14% unlevered for a scheme with all of its risks still there and present. Clearly, we've been doing much better than that. If you look at Aldermanbury as an interesting case in point, that's showing a circa 10% unlevered IRR and a circa 11% profit on cost. Yet, the single biggest risks are either out of the equation because we pre-leased it, or we're soon to have out of the equation because Andy's in the market with Helen and the team getting the building contracts placed.
It's, you know, horses for courses as ever, but that gives you a sense of our aspiration. Right. Time for a few more, maybe. Yes. Thank you.
Hi, Marie Dormeuil from Green Street. Just a follow-up on your development pipeline. Do you need pre-let to launch some of these schemes, or are you happy to go speculative? Maybe first question. More quicker questions. You had a slide in your full-year presentation about dividend and the fact that in the previous cycle, you were ready to pay dividend ahead of, you know, earnings. Is this still true? You know, if you can give us any indication of how comfortable you are on that matter. The last one is on admin costs. I think they've gone up if I'm not mistaken.
Does this relate to the roll-up of your Flex offer or is this just separate? If that includes some of the Flex offering, how much more could it grow or you think you're getting to a pretty stabilized position?
Great questions, Marie. Thank you. Nick, maybe you can take the second two. Rich, through the marvels of modern science, maybe you can find us the slide from May's presentation 'cause it was quite useful. On your first question around spec, do we need pre-lets to go with our schemes? Thanks, Rich. That's perfect. French Railways, no. Minerva, no. Although in both cases, I wager we'll pre-let them. In relation to New City Court, I think we'll pre-let some of the space, but it's a taller building, assuming we get planning. It's a taller building, and it's less likely therefore to have fully pre-leased baked in by the time we start.
It is such a good quality scheme that I think it's one of those buildings that once you start building, it's right on top of London Bridge. It's got fabulous public realm around it that we're creating and so on and so on. I think we will find the interest for that will be very strong. I suspect in all three cases, we will be looking to start speculatively with an expectation that we will lease as we progress. Those decisions don't get taken yet. As I described earlier, we look at making decisions on a quarterly basis, essentially around allocation of capital. As I described, you can see anticipated start Q1 2024.
That's a 2023 decision for New City Court post the May, if it is May, and we still have the same Secretary of State and so on. In French Railways and Minerva, they're much smaller, so they're in many ways easier, and they are next year decisions as well. Nick.
I mean, dividend, I mean, we tried to keep the deck below 100 pages, and I think we just managed to do it. Read nothing into us having removed the slide. The approach around dividend remains exactly as it has always been, progressive policy. At points that we are covered and earnings are growing, we'll grow the dividend. In periods where earnings are declining and we're uncovered, we'll keep it flat. As we said back at the CMD and the full year results, we've got a P&L which is in transition, very similar to what we had back in 2012-2013. We had a couple of years of uncover. This time round, could it be two, three years? I think it's gonna be that kind of magnitude.
The level of under GBP 1 million is de minimis, so no change around dividend policy. With regards to admin, there is a slide in the back which we're trying to give a bit more color around this, which sets out some of the reasons as to why admin has been increasing. There are clearly some quite big variable swings in there linked to particularly the purple bar being performance-related pay. What I would say is we have been investing in the platform, both with regards to Flex but also building out our customer-first capability. That has led to some increase in headcount. I would expect that growth in headcount to decelerate from here.
Not saying there isn't gonna be some further new skills that we need to get into the business, but I would expect a deceleration in headcount build out from where it has been.
Thank you, Nick. All good? Great. I gather we have one question online. For those of you who are really interested in that chart, Marie referenced it, slide nine from the May presentation.
Okay, it's a question on joint ventures, and with any potential for new joint ventures, would that be with owners of existing assets or bringing in new capital? Would it be on an asset-by-asset basis or something more structured?
How long is a piece of string? The question, in case you didn't hear it, was joint ventures. All of you know that we've done many joint ventures over the years. Would they be, if we were going to do them, with new capital only or new assets? I'm not sure I can answer that question. I don't know why I'm looking at you, Steve, but I'm not sure I can answer that question directly because it depends on what it is. We have done both. Previously, we brought in fresh capital in the case of Hanover Square, for example, to help spread risk and for us to monetize some of our early returns, as well as done joint ventures.
In fact, the creation of Aldermanbury Square came from a joint venture where another party brought an asset. We've done both, and I would expect looking forward, it could be either. I mean, as it stands at the minute, we've probably got the opportunity to do both 'cause we have some large assets that we might choose to spread risk around. Going back to Kieran, your question, we might choose to bring capital in to help spread that risk a little bit and to monetize early returns. We've also got an acquisition program looking at new opportunities with our gearing where it is, where I expect we'll buy stuff, some of which might be a joint venture. It could be both.
Thank you very much.
Okay. Thank you. You're welcome. So I think unless we have any other burning issues, we're around for the rest of the day. Uh, from our perspective, um, it's great to see you all. Thank you so much. I hope you got the sense that this is a business in, uh, great health, uh, with lots to go for, quality products, looking through the immediate downturn into the medium term, uh, which we think is going to be rich with opportunity, and we're very well- positioned to take advantage of all of that. Thank you very much.