Landsec boss reveals new growth strategy with London in focus and disposals of retail parks
UK property giant Land Securities’ new boss on Monday showed a big vote of confidence in London, unveiling plans to buy more in the capital, despite Covid-19 wreaking havoc on the market.
Chief executive Mark Allan said the FTSE 100 landlord, which has a £12.8 billion property empire, will look to exit retail parks, leisure and hotels to focus on central London.
His growth strategy will be greeted with relief as the capital faced a yet deeper crisis on the first working day under its new Tier 2 lockdown status. Expectations were of yet more reductions in crucial footfall as commuters and shoppers stay away.
Landlords like Landsec have seen office occupation levels plunge since people started working from home for the lockdown, while retail footfall has been hurt by travel restrictions.
The latest rules ban people from different households meeting indoors, including in restaurants, and people have been told they should still work from home where possible.
But Landsec’s chief executive Mark Allan, who started in April, said his firm’s central London estate “represents a strong foundation from which to build a growth-focused strategy”.
Landsec will look to sell some properties to “crystallise significant value already created”, and invest in new projects in London.
Among its existing sites is the large Nova office complex in Victoria, and the Piccadilly Lights, including the offices behind the screen.
In a presentation today, Marcus Geddes, Landsec’s head of property, acknowledged that “London continues to bear the cost of Covid”, and office occupancy in the group’s portfolio is “currently low”. Offices make up 53% of Landsec’s estate.
But Geddes said Landsec is planning beyond the pandemic and he pointed to a number of encouraging signs, including tech firms looking for new office space. He added: “Long-term strategic moves continue to be planned.”
Geddes said investor demand is improving as Landsec’s Allan, previously boss of developer St Modwen, said other parts of his strategy include disposing of assets in its £1.6 billion specialist division, including retail parks and hotels.
It will look at opportunities to enhance its shopping centres. Other retail landlords have looked at ideas such as creating flats on under-used parts of retail sites.
Allan said the plan positions the business for growth. He added: “It will build on existing areas of competitive advantage. It will position the business to benefit from long-term macro trends. And it will be built around a clear, authentic purpose so that it delivers value not just for shareholders but for all stakeholders.”
The group said: “Income will be an important component of our property returns but we do not believe it should be the key driver. This approach will enable us to increase our focus on delivering true value creation. Delivering our strategy will involve taking more operational risk and this will be offset through lower levels of financial gearing.”
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