Real Estate

Return of workers and shoppers pushes Landsec back to profit

The return of workers and shoppers to UK cities and a stronger than expected economic recovery from the pandemic has helped push listed landlord Landsec back to profitability.

The FTSE 100 company posted pre-tax profits of £275m for the six months to September 30, compared with an £835m loss in the same period a year earlier.

The easing of lockdown restrictions helped Landsec’s portfolio of commercial property, which increased in value by £81m in the six months. In the previous financial year, it lost £1.6bn, or 13.7 per cent, of its value.

“Anyone who has tried to make a restaurant reservation in London in recent weeks and months will know how busy the centre of the city has been,” said Mark Allan, Landsec’s chief executive.

Businesses have felt more confident about taking on new offices, with technology companies, asset managers and professional services groups among those hunting for space, he added.

But their priorities have changed because of the pandemic. “Occupiers are talking about quality, sustainability and flexibility . . . [and about] how they best use their space, rather than how much space they need,” said Allan.

Colm Lauder, an analyst at Goodbody, said Landsec’s results were evidence that the falls in commercial property valuations, which accelerated during the pandemic, were slowing again. “For the right kind of assets, occupier demand is quite strong and healthier than valuers were thinking six or 12 months ago . . . There are still certain parts of the portfolio which are falling in value, but they will be much more modest,” he said.

Changes in the valuations of parts of Landsec’s portfolio show the diverging fortunes of different types of commercial property. London offices increased in value by 0.5 per cent over the six months to the end of September but shops in the capital lost 6.9 per cent of their value. The value of retail parks, meanwhile, increased by 15.6 per cent.

Landsec also said its new strategy focusing on central London offices, large retail destinations and mixed-use developments in cities was taking shape.

It agreed this month to buy U+I, a regeneration-focused developer with large plots of land in Manchester and London, for £190m. Two days later, it announced it had bought a majority stake in MediaCity in Salford, the Manchester base for the BBC and ITV, for £425.6m.

Its shares rose 2.5 per cent in early London trading on Tuesday and are up 10 per cent in the year to date.


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