Lendlease halts $1.23B San Francisco project amid real estate challenges

Lendlease Group, an Australian developer, has halted construction on a $1.23 billion office and apartment project in San Francisco due to challenges in the struggling West Coast real estate sector. This decision follows a decline in their yearly core profit. The commercial real estate market in California has been severely affected on a global scale due to remote work reducing the need for office space, coinciding with increasing interest rates that impact property values and loan expenses.

In May, a report from Jones Lang LaSalle revealed that office access in San Francisco was the furthest from the pre-pandemic norm, dropping by 58%—the largest decrease worldwide. Earlier this year, Lendlease temporarily halted progress on the 47-story Hayes Point development located in central San Francisco. This project is their most significant investment in the Americas.

Lendlease has a global presence, participating in real estate ownership, investment, and management, which includes a substantial A$33 billion office portfolio. The developer disclosed a statutory post-tax loss of A$232 million, attributed to property value adjustments and a provision of $295 million to address safety concerns in certain UK buildings, including those with flammable cladding.

Property values experienced a decline of approximately 7%, resulting in a decrease of A$175 million throughout the portfolio. Within this portfolio, the office sector saw a decrease of roughly 9%.Core operating profit after taxes, excluding one-time items and valuation adjustments, stood at A$257 million, marking a 7% drop compared to the previous year. Funds under management expanded by 9%, reaching a total of A$48.3 billion.

Next (Dexus reports first loss in 14 years amid rising interest rates)

Lendlease halts $1.23B San Francisco project amid real estate challenges

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