The Crown Estate delivers a record £1.1 billion net revenue profit for the public finances
The Crown Estate
A year of record results driven by decades of investment in offshore wind, combined with a diverse and resilient property and land portfolio, shows how The Crown Estate continues to deliver economic, social, and environmental value for the benefit of the nation.
2023/24 Results Summary
Net revenue profit of £1.1 billion, £658.1million higher than last year, generated for the nation’s finances, showing the continued resilience of the portfolio, and the short-term uplift from Offshore Wind leasing. This means that more than £4 billion has been delivered to the Treasury in the past 10 years.
Positive underlying performance of the commercial property portfolios, which outperformed The Crown Estate’s bespoke MSCI commercial property benchmark by 2.0 percentage points as occupancy rates and rental values across its portfolio showed signs of recovery.
Overall portfolio value decreased, as expected, to £15.5 billion from £16.8 billion as the receipt of option fees and accelerated offshore wind delivery expectations were reflected in lower asset valuations for the marine portfolio.
Launch of Offshore Wind Leasing Round 5 and acceleration of Round 4 set to deliver more clean energy, faster.
Restarted the pipeline of commercial property developments in London with major schemes underway at New Zealand House, 10 Spring Gardens and 33-35 Piccadilly, which have a Gross Development Value of more than £430 million.
Committed £125 million to turn a former department store into much-needed lab space in Oxford as part of a new partnership with Oxford Science Enterprises (OSE) and Pioneer Group, completing the transaction in May 2024.
Around 200km of new hedgerows and 400 acres of woodland planted through The Crown Estate Environment Fund.
Achieved a 15% reduction in energy consumption across the real estate portfolio, exceeding company targets.
Government announcement in the King’s Speech to bring forward legislation to modernise The Crown Estate Act, including investment and borrowing powers.
Dan Labbad, Chief Executive Officer at The Crown Estate, said:
“Today’s record results are the product of years of commitment and investment into helping create the UK’s world-leading offshore wind sector, as well as the active management of our diverse and resilient portfolio. Our track record and remit are also enabling us to invest and lay the foundations for future value creation that will benefit the country and its finances. In support of this, we have welcomed the Government’s commitment to bring forward legislation that will broaden our investment powers and enable us to have an even greater impact in the long-term national interest, from supporting the UK’s decarbonised, energy secure future to nature recovery, regeneration and economic growth.”
The Crown Estate’s strategy and diverse national portfolio
The Crown Estate’s strategic focus is in areas where there are long-term structural challenges facing the nation and where it is well-placed to play a role:
Responsibly generating value and financial returns for the country
Being a leader in supporting the UK towards a net zero carbon and energy-secure future
Taking a leading role in stewarding the UK’s natural environment and
Helping to create inclusive communities through its activities supporting economic growth and productivity
Its diverse national portfolio incorporates strategic land, 10 million sq ft across Regent Street and St James’s in London’s West End, c. 200,000 acres of rural land, including Windsor Great Park, and management of the seabed around England, Wales and Northern Ireland.
Generating value and financial returns for the country
The Crown Estate works to make a positive impact for net zero, nature and communities while creating financial value for the UK. This year, it generated a record net revenue profit of £1.1 billion for the public finances, which means more than £4 billion has been delivered to the Treasury in the past 10 years.
These strong financial results follow decades of investment in offshore wind and are driven by the option fees being paid by developers through Offshore Wind Leasing Round 4, as well as the underlying resilience of assets across the portfolio, including urban and rural land around the country.
Option fee income is expected to continue at a similar level in the current financial year before dropping to more normal levels when customers begin the development phase of their projects. Option fees for successive leasing rounds, whilst set at auction, are also expected to be lower. However, we expect underlying Group profits to continue to grow in the medium term.
The valuation of the portfolio has risen in recent years, reflecting the income anticipated from option fees in future years. This year’s valuation of £15.5 billion (2022/23: £16.8 billion) shows the figure beginning to normalise as option fees are drawn down for distribution to the nation’s finances together with an improved timeline for projects being delivered. A further reduction is expected in 2024/25 as next year’s income is realised, although The Crown Estate expects to see greater value in the seabed over the medium to long term.
Supporting the UK towards a net zero carbon and energy-secure future
A key pillar of The Crown Estate’s strategy is to support national net zero ambitions and build towards greater energy security. It does this both through its real estate portfolio and through leasing the seabed for offshore wind and emerging technologies, where it also invests, to sustainably accelerate and de-risk projects.
There are now 36 wind farms operating across its marine holdings with a combined capacity of 11.8GW, enough renewable electricity to power approximately 11 million homes. When combined with capacity in Scottish waters, this secures the UK’s position as a global leader in the sector.
An important moment from the year was the launch of Offshore Wind Leasing Round 5, which is set to generate up to a further 4.5GW by putting innovative floating wind farms in the Celtic Sea, bringing a wide range of supply chain opportunities for UK companies.
To support the UK’s ambition to deliver 50GW of offshore wind by the end of the decade, subject to legislation, The Crown Estate is now planning to deliver seabed space to generate a further 20 – 30GW of renewable offshore wind off the coast of England and Wales by 2030.
The year also saw progress in other marine renewable energies, including a £1.4 million investment in the Morlais tidal energy demonstration project, and the signing of an Agreement for Lease for the ‘Endurance’ project which could lead the way for one of the world’s largest carbon capture and storage projects below the North Sea.
As a major UK landowner with a rural portfolio including agricultural land and a property portfolio including Regent Street and St James in London’s West End, the company has a vital role to play in decarbonising its portfolio, particularly improving the energy efficiency of heritage buildings. A key achievement was the expectation-beating 15% reduction in energy consumption across the real estate portfolio, achieved through a combination of measures including upgrading lighting and air conditioning systems, reviewing energy meters and creating energy data “building passports”.
Stewarding the UK’s natural environment
The Crown Estate’s marine, rural and urban assets all have different roles to play in supporting nature recovery at a time when the State of Nature report reveals the UK is one of the most nature-depleted countries in the world.
The Whole of Seabed Programme uses data to identify prime areas of opportunity to deliver for biodiversity and ecosystem resilience around the coast and seabed. Ongoing projects with partners include working with the Sea Ranger Service to gather field data on birds and marine mammals in the Celtic Sea, as well as enabling trials to restore seagrass and supporting several oyster restoration projects.
The Crown Estate has an ambition to dedicate 15% of its rural portfolio – which includes extensive areas of let farmland, uplands and the Windsor Estate – to nature recovery and is working with farmers to create new habitats and improve climate resilience.
Established two years ago, The Crown Estate Environment Fund has supported the planting of around 200km of new hedgerows and 400 acres of new woodland. Following this success, The Crown Estate has doubled the fund from £5 million to £10 million. It also began the rollout of new innovative Environmental Farm Business Tenancy agreements, designed to support nature recovery and carbon reduction.
Supporting nature in towns and cities is a key focus for The Crown Estate’s property businesses. In London, this includes working with Westminster City Council on the aspiration to plan a ‘Park-to-Park’ green link between Regent’s Park and St James’ Park. More than 3,500 people have been engaged to create a permanent replacement for the temporary scheme developed during the pandemic to support nature and greening and prioritise pedestrians. During the year, Westminster City Council agreed to extend the scope of the project to include Haymarket and Piccadilly Circus.
Inclusive communities and economic growth
The report shows how The Crown Estate is investing to support communities and economic growth around the country.
To ensure that the benefits of offshore wind are felt onshore, Offshore Wind Leasing Round 5 includes requirements on developers to deliver value for the communities around the Celtic Sea; while a £10 million Supply Chain Accelerator was launched to help UK businesses gear up for the opportunities the projects will create.
To help drive the science and innovation economy, seen as vital for future growth, the company signalled the potential to invest up to £1.5 billion in the sector nationally over the next 15 years, starting with multi-stakeholder projects around Oxford and Cambridge.
The Crown Estate is investing for the future in London by restarting the pipeline of commercial property developments with ambitions to modernise and decarbonise heritage properties such as 10 Spring Gardens and New Zealand House.
As part of its new regional strategy, the company is looking at how it can support innovation in housing. It launched two pilot projects in Knutsford, Cheshire and Wootton, Bedfordshire where, working with ambitious development partners, it is hoping to test whether high-quality, net zero carbon homes are deliverable at scale. The aim is to share the learnings with the wider industry to inform best practice.
Two Minecraft Education worlds, developed in partnership with Microsoft to help children aged 7-14 build the skills and knowledge needed for careers in sustainability, have been downloaded more than a million times to date.
The numbers in brief
In London, returning demand for office space and robust residential demand saw vacancy rates in the lettable void space fall to 2.2%, down from 4.6% last year, whilst revenue increased 3.2% to £229.7 million.
Office space letting was robust amid strong demand for prime West End offices with more than 90 new leases signed in the year with some rents rising by as much as 16%. More than 60 new retail leases were completed in the period at rents an average of 4% above estimated values. Footfall is still down 15% on pre-pandemic levels, impacted by the cost-of-living challenges and the end of tax-free shopping for non-EU tourists.
Revenue was stable across the Regional business (outside of London and Rural portfolios) at £104.8 million, compared to £105.5 million last year, supported by a stronger than expected performance across the retail park sector. Vacancy rates increased slightly to 8.1%, up from 7.5% in 2022/23, due to improvement works at Cambridge Business Park, although this was partially offset by new leases achieving up to 4% above estimated rental values.
Wider market trends saw the overall value of the real estate portfolios reduced by £443.3 million to £8.4 billion as valuation yields rose 50 bps.
The popularity of the new adventure playground at Windsor help to drive footfall which, alongside the implementation of a new rural strategy, helped increase revenues in the Windsor & Rural business to £40.1 million, up from £36.6 million last year. The portfolio value remained stable at £1.4 billion.