Landsec eyes new London development amidst Brexit uncertainty

Landsec talked up its ambitions to expand its pipeline in the London office market in its half-year results today and take advantage of any weakness in the market due to Brexit. The company, led by Rob Noel, has taken a conservative view on development in the capital over the past two years but it has given the market some sign that it may be ready to bolster its 2m sq ft pipeline. In his chief executive’s statement, Noel said: “We remain confident in our view that London is a global city with strong long-term prospects. “Occupational demand and preletting activity have remained steady and we expect a continued flight to quality. “This trend may put pressure on second-hand space and we will continue to monitor the market for opportunities to deploy capital.” However, he added in an analyst call that the company will not be starting any developments before the UK exits the EU. The company is currently building Deutsche Bank’s new headquarters at 21 Moorfields, EC2, and also has Nova East and Portland House in Victoria, SW1, and 1 Sherwood Street, W1, in its pipeline. In a similar move announced by intu last month, as well other owners of major retail schemes across the UK, Landsec is also looking to convert retail space or add residential uses in order to extract value and offset the woes in the mall market. It is looking to add 4,000 flats on its suburban London retail sites including at Finchley Road, NW3, Shepherds Bush, W12, and Lewisham shopping centre, SE13. Alan Carter, managing director and analyst at Stifel, said such moves in the development market, as well as a move into the serviced office sector with the launch of 36,000 sq ft at 123 Victoria Street, SW1, were behind the curve.      “While flagging up a £2bn, 2m sq ft London office development pipeline, the timing of delivery, apart from the Deutsche prelet at Moorfields Highwalk (due 2021), remains somewhat vague, and would still seem only likely to commence with prelettings. “A flexible office product will be rolled out, starting in Victoria, but is pretty small beer and perhaps a tad behind the curve with others much further down the track on this, while again, like others, much is now being made of the potential of upgrading somewhat secondary shopping centres and locations into mixed-use destinations with a significant residential exposure. “Nothing wrong with it at all, but silk purse and sow’s ear spring to mind.” On retail disposals, the company’s chief financial officer, Martin Greenslade, told EG that the company was “in the right position”. He said: “We did a huge amount of shopping centre sales. If you went back 10, 15 years ago we would have had around 26 shopping centres but we now have six outside London. So we have done a huge amount of selling. “If someone wanted to buy one of our assets at a price we think is attractive to us and our shareholders we will, but we are not out there to compete to sell assets in this market. There are a lot of people out there who I think are late in the day, trying to sell retail parks that they frankly should have sold sooner, and we don’t want to compete with that.” In the six months to the end of 30 September, the company saw the value of its portfolio fall by £188m or 1.4% to £14bn and its loan-to-value also rose marginally by 0.4 percentage points to 26.2%. However, adjusted diluted earnings per share rose by 17.9% to 30.3p and its dividend per share rose by 14.7% to 22.6p. To send feedback, e-mail david.hatcher@egi.co.uk or tweet @hatcherdavid or @estatesgazette