How to make £1bn for the crown estate? The answer is blowing in the wind

Photograph by Suki Dhanda

With a portfolio that spans the seabed around Britain, a sizeable chunk of London’s most valuable property, including most of Regent Street and rural holdings such as Windsor Park with its ancient oaks, the crown estate is, it’s fair to say, a unique business.

It manages assets worth £15bn across its land, property and seabed interests, backing experimental offshore technology, as well as startups in Oxford, and yet opens its annual report with the phrase: “May it please your Majesty.”

The marine division has been immensely lucrative for the crown estate in the past couple of years, and consequently for the occupants of Buckingham Palace. The business’s profit goes to the Treasury, which then makes an annual payment to finance the royal family (set at 12% of Crown Estate profits).

The business is, despite its name, “much more independent [of royalty] than people think”, Labbad insists. “We operate our business day to day, we develop our own strategy, and run our business independently of the royal household and the government.” There is, he says, only one part of the portfolio where the king’s advice is sought: Windsor Great Park, a vast chunk of countryside sprawling between Berkshire and Surrey.

Yet it has become embroiled in a royal scandal. MPs wrote to the crown estate demanding an explanation for the lease of Royal Lodge to Andrew Mountbatten-Windsor for a nominal rent.

The public accounts committee sought assurance that the “rationale for the lease justifies the minimal rent charged”. (The deal was that the former royal paid £1m upfront and then spent £7.5m on refurbishment.)

Asked if the affair was handled correctly, Labbad replies: “Absolutely … at all times commissioners were seeking to do the right thing.” It can be hard to judge the success of a business that, rather like the monarchy, has little to compare it with.

The crown estate is independent of both government and sovereign, and overseen by its own board of commissioners, occupying a space somewhere between government and the private sector. Its strategy offers a window on the country’s long-term outlook.

Labbad is not a fuddy-duddy courtier, but an Australian businessman of Egyptian and Italian heritage who trained as an engineer. Over the past four years, he’s acquired a master’s degree in computer science and spends his spare time tinkering with computers – coding, he says, is how he relaxes.

Labbad, who spent 16 years in executive positions at Australian property developer Lendlease, most recently as its CEO of international operations, arrived at the crown estate in late 2019, his first year overlapping with the pandemic. At the time, the business’s central London property holdings generated about half its revenue.

“One of the first fundamental questions I asked was: what does the country need?” he says. “And how do we compare that with what we offer as an organisation through our assets and capabilities?”

His conclusion was that the business needed to become much more active in its use of assets, particularly in the rollout of offshore wind in the underwater kingdom where it has monopoly rights. This strategy aligned private sector demand with the government’s commitment to reach net zero by the middle of the century. If he needed any further spur to act, the deserted shops and office blocks of central London in lockdown provided it.

Labbad is evangelical about offshore wind, pointing out that UK deployment of turbines is second only to China. It’s an area where, as he notes, climate resilience aligns with energy security.

Leasing seabed sites for development off the coasts of England, Wales and Northern Ireland (crown estate Scotland is a separate business) has boosted the estate’s profits from £443m in 2022 to more than £1bn in each of the past two years.

These windfalls meant the sovereign grant rose more than 50% last year, to £132m, and will reach £138m next year. The monarchy, it seems, is powered by a stiff breeze.

But it’s also a sector that has battened down the hatches as construction costs have surged while the Trump administration has effectively declared war on “windmills”, as the president refers to them.

“Because of the shifting sands politically, and the economics of the sector globally, we find ourselves with a smaller balance sheet to access, and a smaller pool of capability to deploy offshore wind,” Labbad says.

Last year is expected to be the high point for option fees – the annual fees paid to the estate by offshore wind project developers for rights to the seabed, which are due until the developers are ready to move into construction and enter a lease. These fees are set at auction and the sizable boost to the crown estate’s coffers over the past two years indicates the scale of demand.

It is, Labbad acknowledges, “one of the more volatile parts of our portfolio where there is a lot of uncertainty”. That uncertainty includes unproven technology: last year’s auction round drew bids from developers of floating wind platforms, which can be anchored in deeper waters than traditional turbines and take advantage of stronger winds. But they come with additional costs and risks, such as greater strain on their power transmission cables.

There’s further economic value to be derived from the seabed, Labbad suggests, including carbon capture and storage – reversing the extraction of fossil fuels from the North Sea – and using wind and wave power to generate green hydrogen, a fuel that could be used to decarbonise heavy goods vehicles.

Last year may have marked a peak for income from offshore wind, but Labbad is confident about the prospects for London property too. There are plenty of indicators that office life is back, including JP Morgan’s plans for a new tower in Canary Wharf and stricter policies for employees to return to the office.

“We’re seeing strong demand for office space,” he said, adding that the upward trajectory of rent reinforces that view. The estate has just signed one of the biggest deals in the West End’s recent history, letting more than 9,000 sq metres of office space above the Regent Street Apple store to an investment manager.

The estate also wants to create a thoroughfare running north-south through the centre of the capital along Regent Street and St James, providing wider pavements, more places to sit and more trees.

Referring to the Regency architect John Nash, Labbad says: “Nash’s vision was to link Regent’s Park and St James’s Park. Our vision is to rediscover that and help make that pathway the spine of London, – a lot more active, a lot more diverse, open to people who walk on the streets – providing uses that a lot more people can access.

Over the next 10 years, the estate’s property and marine divisions will generate an equal share of revenue, while the rural part of the business will generate a lower proportion.

The crown estate has existed in its modern form since 1961. Its roots are more ancient, stretching back at least far as the Norman conquest and waxing or waning as monarchs accumulated or depleted assets.

Environmental, social and governance goals (ESG) may now be out of fashion, but Labbad’s strategy emphasises climate resilience. “I question, when the crown estate is scrutinised 50 years from now, will our commitment to climate resilience be seen as necessary or not?” he says.

“We believe it will be seen as necessary because of the science, and if you look at the insurance industry and the acceleration of weather-based claims. We have a responsibility to think through that lens.”