Landsec: Workers returning to offices in London boost landlord

London’s return to the office has driven the success of Land Securities (Landsec). The company has seen an 18 per cent jump in workers tapping into its offices across the capital over the past year.

The British real estate investment trust credited the strong uptick in office visits and growing rent in London, as well as its retail holdings, for its “continued operational outperformance” in its full-year results today.

This delivered 1.4 per cent net income growth in its London offices, with overall occupancy jumping to 97.3 per cent, and reletting or renewals 15 per cent above their previous rental contracts.

Landsec added that 81 per cent of its tenants in the capital either expanded into the office space they wanted or kept it the same.

The trust’s portfolio of properties is now increasingly concentrated, with 72 per cent of its offices in London now in the West End, up from 48 per cent three years ago.

Meanwhile in retail, net income growth was a whopping 6.9 per cent versus a year ago, with the trust noting a focus from brands on “fewer, bigger, better stores”, as its locations reported a 4.1 per cent annual increase in sales growth.

However, the trust still reported a loss before tax of £341m, though this was down from a loss of £622m the year before.

Earnings fell from £393m last year to £371m, though this largely came from the first half of the year, as the value of its portfolio dropped six per cent in the first half of the year.

The company declared a dividend for the year of 39.6p, up from the 38.6p paid last year. It said this was “in line with guidance of low single digit percentage growth.”

The firm has also secured planning consent to build 1,800 homes on Finchley Road, with the project due to start in 2025.

Mark Allan, Landsec’s chief executive, noted that “around 80 per cent of our portfolio is now invested in twelve places with significant scarcity value, where our competitive advantages in shaping and curating these places mean we expect like-for-like rents to continue to grow”.

He added: “Following a reset of values over the past two years driven by rising interest rates, the stabilisation in rates and evidence of continued rental growth is starting to attract increased investor interest for the best assets.

“Around 60 per cent of our portfolio already showed stable values in the second half and overall yields were largely stable in the final quarter, pointing to a positive outlook for our overall return on equity.

“The quality and return prospects of our portfolio are further bolstered by our strong balance sheet. After a period of proactive capital recycling, most recently with over £600m of non-core assets sold in the past seven months, we have meaningful capacity to invest in high quality assets that add to our best-in-class portfolio at what we believe to be an attractive point in the cycle.”