Landsec has expressed strong confidence in expanding its investment in the retail sector, highlighting plans to deploy further capital in the coming months.
The real estate investment trust (REIT) recently strengthened its portfolio with a £120m acquisition of an additional stake in Bluewater, Kent. The company revealed that retail offers “the most attractive risk-adjusted returns,” with high single-digit income yields and rising rents.
Despite this optimism, Landsec noted that new supply in the market is “non-existent.” For top-tier assets, non-value-adding capital expenditure remains minimal, accounting for just 0.2% of total asset value.
This statement coincides with Landsec’s release of its half-year results for the 2024 financial year, covering the six months up to 30 September. The company reported a pre-tax profit of £243m, a significant recovery from a £193m loss during the same period last year.
Landsec attributed part of its success to a shift in retail trends, where brands are prioritising fewer but larger flagship stores. This approach has led to new leases and upsizes with prominent names such as Primark, Pull&Bear, Bershka, Sephora, and JD Sports across its portfolio.
The group’s retail portfolio occupancy now stands at 96%, exceeding pre-Covid levels and marking a 70-basis-point improvement. Leases worth £26m have been signed or are nearing completion, with rents 7% above estimated values.
Mark Allan, Landsec’s Chief Executive, commented:
“Our operational outperformance continues, with further growth in occupancy and positive rental uplifts across both our retail and London portfolios. This progress is translating into accelerated income growth.”
He added:
“Property values have stabilised, and rising rental values are driving a modest increase in capital values. This has delivered a positive total return on equity. We expect these trends to continue, supported by strong customer demand for our premium spaces and increased activity in the investment market. Our repositioning towards higher-return opportunities, combined with disciplined balance sheet management, leaves us well-positioned to deliver growth and attractive returns.”
Earlier this year, Landsec announced its intention to focus on acquisitions throughout 2024, leveraging funds from recent disposals to capitalise on emerging opportunities.
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