By Aby Jose Koilparambil
(Reuters) -Land Securities would invest more in prime retail spaces in the near term, buoyed by positive outlook for that portfolio, its CEO said on Tuesday, after the British landlord’s year-end valuation of its properties trumped market view.
Rising interest rates and deepening macro-economic worries have dampened a tentative recovery in the highly leveraged British commercial property sector from pandemic lows, while the office space portfolio has struggled due to evolving work habits.
Landsec’s EPRA (European Public Real Estate Association) net tangible assets – a key measure that gauges the value of its buildings – fell about 12% to 936 pence per share, ahead of company-compiled analysts’ estimates of 920 pence.
Shares in the FTSE 100 firm were trading 2.4% higher at 636 pence as of 0854 GMT.
“We want prime retail to be somewhere in the order of 20-25% of the overall portfolio, up from the current 18%,” said CEO Mark Allan in a media call.
The group’s addition of retail to its key office portfolio in the focus list comes at a time office properties are struggling because of hybrid work patterns, with research data from real estate services firm Savills showing that London topped the office value pricing correction among major European markets.
About two thirds of Landsec’s total portfolio of 10.24 billion pounds ($12.92 billion), which fell by 7.7% year-on-year, accounts for Central London properties, of which 58% is office space.
CEO Allan said the company has sold off London office space worth 2.2 billion pounds out of the 2.5 billion pound target set as part of its strategic initiative laid out in late 2020.
Landsec said it expects low to mid-single digit estimated rental value growth in London and major retail destinations this fiscal year. Its loss before tax came in at 622 million pounds for the year ended March 31, versus a profit of 875 million pounds a year earlier.
($1 = 0.7923 pounds)
(Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Sherry Jacob-Phillips and Ed Osmond)
