Land Securities plans focus on UK developments

Published 19th Jan 2011

Land Securities, UK's largest listed landlord, will focus its efforts on developing new projects, which it expects to produce better returns than acquisitions as the commercial property market recovers.

"Right now we see returns from our development activity as being the most attractive," Land Securities' Chief Executive, Francis Salway, said in a trading update.

"We would expect a number of development projects to deliver returns double the level from acquisitions and probably from corporate acquisitions as well," he told a conference call.

An expected recovery in the UK retail sector has sparked renewed investor interest in prime UK malls, which saw Simon Property make a failed attempt to buy Capital Shopping Centres.

In December, Land Securities bought the Overgate mall in Scotland for 141 million pounds, its largest retail deal in five years, although the rising competition for existing UK assets could hit future returns.

"We expect a wider range of buying opportunities in 2011, although current flows of capital into the sector mean that bidding may remain competitive," Salway said, adding a main source this year was banks looking to offload property assets.


STRONG LETTINGS

Land Securities said its new projects, launched last year after a development hiatus during the UK property market's two-year slump, have seen strong lettings and it plans to start development of a retail site in Scotland due to growing demand.

The company, which in November posted a 6.7 percent rise in first-half net asset value, is betting on private sector growth to fill space in its new projects, weaning itself from reliance on the public sector as job cuts bite.

"The first quarter of 2011 is likely to see mixed news flow around the consumer and the economy, but we expect occupational demand from large corporates to remain steady," Salway said.

"We will soon be in a position to start a further retail development at the Atlas Site in Glasgow, such is the interest in the new space that will be created," he said.

The company said retail space at its One New Change development in London, which was completed in October, is now fully let, while 71 percent of the property's office element is either let or about to be let.

Average rents achieved at those offices was 59.40 pounds a square foot a year, indicating a steep rebound in central London office rents. Similar office space would have rented for about 45 pounds a year ago, Salway said.

The company said its Trinity Leeds retail project -- with a total development cost of 350 million pounds -- is so far 65 percent let, or in the advanced stages of being so, two years ahead of completion.

Source: ' Reuters '

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