Landsec swings back into profit as office working resumes

Owner of Piccadilly Lights and Bluewater shopping centre makes pretax profit of £275m in first half

Last modified on Tue 16 Nov 2021 06.41 EST

One of Britain’s biggest property firms, Land Securities, has swung to a half-year profit, helped by a recovery in central London office rents as many people have returned to their workplaces, at least some of the time.

The Bluewater owner said the reopening of retail and a revival in office working had driven the first rise in the value of its property portfolio in five years. It rose by £81m, or 0.8%, to £11bn in the six months to 30 September.

LandSec’s portfolio is 70% made up of central London property, mostly offices such as Deutsche Bank’s London headquarters and an office complex near St Paul’s Cathedral, but also includes shops and Piccadilly Lights, the huge LED advertising screen in Piccadilly Circus and the property behind it. Landsec also owns the Trinity Leeds shopping centre.

Landsec made a pretax profit of £275m in the first half, compared with a 835m loss a year earlier. It said rents for prime London offices remained resilient and the central London office market enjoyed a recovery in leasing and investment this year, after being hit by the pandemic last year.

Mark Allan, the chief executive, struck a more upbeat tone than in May when the developer reported a £1.4bn full-year loss. He said office use had recovered to 55% of pre-Covid levels, partly reversing the surge in working from home sparked by the pandemic. “Office utilisation has increased markedly over the past couple of months as confidence in the safety of workplaces and public transport has improved and government guidance has become clearer,” he said.

The company has rejigged its portfolio, selling off hotels, leisure properties and retail parks. It plans to focus on offices in the heart of the capital and buy more prime shopping malls, capitalising on their declining values, as well as developing mixed-use urban neighbourhoods.

Landsec estimates that 17% of all retail space in the UK is not needed, a figure that is expected to rise to 25% by 2025. However, despite the explosion in online shopping during the pandemic, it is betting on the popularity of good retail locations. Like-for-like sales at its outlet malls such as Braintree Village in Essex rose 7.9% from pre-pandemic levels in the 25 weeks after 12 April, and were up 1% over the six months. Shopping centre sales have also joined in the recovery and are close to 2019 levels.

The company said rents in popular destinations, which had fallen by 65%, were at affordable levels for retailers.

The company sold off £250m of assets and made £616m of acquisitions in the first half, including acquiring a 75% stake in Media City, the 15-hectare (37-acre) media, digital and tech hub in Salford, Greater Manchester. It is also taking over the urban regeneration specialist U+I for £190m.

“Our focus on developing and investing in mixed-use urban neighbourhoods recognises that the lines between where we live, where we work and where we spend our leisure time are becoming increasingly blurred,” the company said.

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