Chief Executive, Derwent London
Quickfire questions: Tom Walker meets Derwent London's CEO
“If you can’t walk to a building, we’re not interested”. Find out how Paul Williams, CEO of office provider Derwent London discovers new locations, the challenges of sustainability, building a solar farm in Scotland, and more.
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About Paul Williams
In a July 2024 interview, Paul Williams, CEO of Derwent London, discussed the company’s focus on walkable Central London office locations and its long-term portfolio strategy. He stated that the company’s portfolio has been "curated over 30 odd years" and would be "really difficult to try and create this portfolio again." Williams described London as "remarkably resilient," noting that while there is "negativity" about the city from America, the West End vacancy rate is "about three and a half percent," which he said is lower than in other parts of London and the United States. Williams said the company has a pipeline of "about 1.8 million square feet of new build over the next decade" and "800,000 square foot of refurbishments," aiming to create "amenity rich green buildings." He also mentioned a "little known fact" that the company owns "five and a half thousand acres up in Scotland" where they plan to build a solar farm. Regarding sustainability, Williams stated the company is "rolling out intelligent buildings" with sensors to reduce energy consumption and is focused on "embodied carbon" in its development decisions.
Transcript (34 segments)
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Interviewer0:05
cities video series and today I'm with Paul Williams from Derwent London. Hi Paul, welcome to the studio.
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Paul Williams0:11
Thank you very much.
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Interviewer0:12
So today we're here to talk about Derwent London, but I just thought it's important to sort of set the context and let everyone sort of know a little bit of background about you. So you joined Derwent in 1987.
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Paul Williams0:21
Yes, that's right.
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Interviewer0:24
Appointed to the board in 1998?
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Paul Williams0:24
Correct.
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Interviewer0:26
And then CEO in 2019?
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Paul Williams0:26
Yep.
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Interviewer0:29
So that's 36 years at one company, so that's pretty impressive, pretty unusual. Maybe a silly question: has anyone been there longer than you?
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Paul Williams0:34
No, I'm employee number four. So John and Simon were the founders and we had a finance director, so I'm employee number four, so I'm the longest standing employee, but we have one who's been a few months less than me.
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Interviewer0:48
Very, very impressive. Fantastic. Right, so just into some quick-fire questions. Could you just first of all just summarize the business for everybody watching?
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Paul Williams0:56
We're an office provider in Central London, five and a half billion pounds. Go as far east as sort of Shoreditch, the T building, about as far west as Paddington. I always say we've got the ultimate environmental policy: we can't walk to a building when I enter? Interested? About two-thirds of it's in the West End, which is very busy.
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Interviewer1:14
Fantastic. And in terms of the demand for the real estate that you're offering to tenants, where does it come from primarily?
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Paul Williams1:19
Well, a whole range of sectors. We did a letting earlier this year to Penco, really good letting, 100,000 square foot pre-let, about 12 and a half percent above ERV. But we've got people like Burberry, we've got a range of creative occupiers over in Shoreditch. So it's a broad brush. It's not the financial services as in traditional the City, but it's a broad brush and professional services as well. So we're very lucky, we're generally multi-let, so we have a variety of occupiers.
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Interviewer1:45
Yeah, I think that's that diversity in the tenant base is what's always sort of we found fascinating. It's not as you say office finance and one sector, you've got huge depth and demand from those sectors. And just thinking about real estate, we always think about NAV as being a fantastically bad way to measure a real estate company because it misses so many things. What would you sort of think is that like maybe the jewel in your crown? What makes your company valuable for investors like us?
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Paul Williams2:12
Firstly, you touch the right beginning: the people. We've been together a long time, we've seen many cycles together. We're all about value creation through acquiring buildings well or refurbishing or developing. So first I'd say the people, but we're also spotting new locations. If we look at the clusters, look at Old Street, but also the King's Cross cluster, bringing people together in new locations and things. So we're a bit disruptive, doing things a bit differently, and making sure that we work with a really great portfolio.
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Interviewer2:37
Yeah, we certainly kind of apply a management premium to the company, think very highly of the team. Thank you. And then with regard to the real estate you own, how easy is it for somebody to try and recreate that portfolio to try and build assets which might compete with you?
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Paul Williams2:54
I would say it's been curated over 30 odd years. We've got some assets that we bought back in the early 1990s. I think it would be really difficult to try and create this portfolio again. We built very early on in the 80s and the 90s and also in the naughties. So we've assembled this portfolio, it's a working portfolio. We do sell, we've sold about 800 million over the last few years, and we bought one as well for the future. So it's adding to the portfolio but also selling those assets we think won't perform.
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Interviewer3:24
And then obviously London is key to driving the business. How do you sort of see London today? There's been lots of noise about Brexit and all sorts of things. How do you see London driving your business forward from here?
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Paul Williams3:36
I think London's remarkably resilient. If you see some of the negativity out in America, I think London feels very different. The West End particularly, I always say beware of averages: the vacancy rate in the West End is about three and a half percent, much lower than the City or even Docklands, far lower than you see in the States and other places. So London is a resilient city, it changes quite regularly, attracts lots of global capital, lots of different occupiers. The West End is busy, it's buzzing, and it's got a whole variety of things: theaters, restaurants, retail. It's London's a special place.
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Interviewer4:09
Yeah, and then from a business perspective, as you look out over the next five years, what is it that most excites you about the business?
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Paul Williams4:17
I think what excites me is that we do have a good pipeline going forward. I think about 1.8 million square feet of new build over the next decade. We've got 800,000 square foot of refurbishments. We'll probably do a bit more of that over the next few years. So keep creating some really good amenity-rich green buildings. I think we've done five net zero carbon buildings so far. And of course, little known fact: we've got five and a half thousand acres up in Scotland, we're going to build a solar farm, 100 acres of that, 18.84 megawatt, and grow some electricity. So actually helping our occupiers with sustainability and keep doing things a bit differently.
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Interviewer4:52
Yeah, now I've mentioned the solar farm to a few clients and had a number of sarcastic comments about sunshine in Scotland. So that's something that we're aware of, but they have a lot of daylight in Scotland, particularly in the summer, and I think that's the important matter. I'll make sure I come back with that retort. And then from a sustainability point, you mentioned it just then, green buildings, huge amount going on. What's the biggest challenge or attribute that Derwent has for sustainability?
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Paul Williams5:20
I think one of the things we think about a lot is embodied carbon: how much of the basement and foundations do we keep if we're going to do a new build, how much can we really refurbish? And then scope 3, occupiers' electrical consumption, etc. We're going to work with them to try to reduce consumption. So we're rolling out intelligent buildings to try and have sensors, try to work out what we are consuming, and reduce consumption. So it's reducing consumption and dealing with embodied carbon.
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Interviewer5:50
Yeah, embodied carbon is something that we think carefully about as well, so I agree with you on that. And now some completely non-real estate related questions. Who's the most famous person you've met?
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Paul Williams5:55
I've been lucky enough to meet the king, so he's pretty famous.
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Interviewer5:58
He's certainly up there. That's very good. And who wins a fight between a lion and a tiger?
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Paul Williams6:03
I'd say it's a score draw. But I would say probably a score draw, one all.
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Interviewer6:08
Okay. And you prefer cheese or chocolate?
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Paul Williams6:10
Oh, definitely cheese, definitely cheese.
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Interviewer6:14
Okay. And then your favorite city?
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Paul Williams6:17
My favorite city, I would say obviously London, but you might have to exclude London, so I would say Bristol because that's where I was born and that's where my football team comes from.
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Interviewer6:26
Very good, perfect. Paul, thanks very much for joining us, and thank you to everybody for watching.
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Paul Williams6:29
Thank you for having me.