UK’s Landsec expects rents to counter lower building valuations

By Aby Jose Koilparambil

(Reuters) -British landlord Land Securities expects between low and mid single-digit percentage growth in annual London rental values despite continued pressure on building valuations.

Valuations have been hit by high interest rates, hurting investment business within the sector and offsetting relatively better performance on the operational front.

“Investment activity remains thin, but we expect this to pick up in 2024, which should start to support values for the best assets,” CEO Mark Allan said in a statement.

Landsec, which in May said it would invest more in prime retail space buoyed by a positive outlook for that portfolio, expects earnings per share for the full year to be broadly stable compared with a year ago.

The London-headquartered firm, which has attained about 90% of its 2.5 billion pound ($3.07 billion) disposal target set in 2020, said overall Central London occupancy rose 60 basis points to 96.5%. Central London accounts for about two-thirds of Landsec’s property portfolio.

The utilisation or the number of people using the office properties jumped 22% over the last 12 months, with the footfall in the three mid-week days returning to pre-pandemic levels, Allan told reporters in a media call.

The FTSE 100 company’s half-year pretax loss deepened by 0.5% to 193 million pounds ($237.3 million), as net tangible assets – an industry measure that reflects the value of its buildings – fell 4.6% year on year to 893 pence per share as of Sept. 30.

Asked about the impact of the WeWork bankruptcy, Allan said that although the U.S.-based group had been trading well in the London market, the apparent pressure on service levels could see demand going elsewhere to operators with capacity in their flexible workspace portfolio.

Allan said that Landsec’s flexible office space offering Myo is 97% full at the moment.

($1 = 0.8134 pounds)

(Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Rashmi Aich, David Goodman and Christian Schmollinger)