Land Securities raises guidance as commercial property group recovers and makes profits

Land Securities, owner of the Bluewater shopping centre, has raised its full-year outlook after recovering to a profit in the first half.

The commercial property investment trust reported £243m in pre-tax profits for the six months ending September 30, compared with a loss of £193m for the same period last year.

Its like-for-like rental income rose 3.4 per cent as occupancy rates surpassed pre-pandemic levels at its major retail outlets and hit a record 97.9 per cent across its central London portfolio. .

A 10 per cent drop in overhead costs also meant the group expects its profits to be in line with the 50.1 pence per share it achieved last year.

The valuation of LandSec’s property portfolio also expanded by 0.9 percent, helped by stabilizing yields and increased activity in investment markets.

The FTSE 100 firm told investors: “Demand for modern, sustainable office space in London remains strong, and in retail, brands continue to focus on fewer, but bigger and better, stores in key locations.”

During the period, it struck a deal that allowed high street giant Primark to almost double its space at the White Rose Center in Leeds from 37,000 sq ft to 71,000 sq ft.

In addition, cosmetics brand Sephora and brands led by Inditex, Bershka and Pull&Bear, opened outlets in Bluewater, while JD Sports opened a major new store in Cardiff’s St. David’s shopping centre.

LandSec anticipates its retail portfolio will grow in the second half on track to achieve a low- to mid-single-digit percentage gain in rental values ​​this fiscal year.

Mark Allen, its chief executive, said: “We have continued to reposition our portfolio towards higher-return opportunities and are confident of deploying further capital to do so in the second half.”

“Having managed our balance sheet well and the markets have corrected, we are now well placed to generate growth and attractive returns.”

Britain’s commercial property sector remains depressed by high interest rates and increased working from home since the Covid-19 pandemic began.

The UK office market recorded just €4.2 billion in transactions in the first six months of 2024, according to MSCI, its weakest performance since the financial company began measuring the data in 2001.

Russ Mould, chief investment officer at AJ Bell, said the company’s trading update was “surprising not only for the earnings improvement contained within it but also for the optimistic tone adopted by the company”.

He added: “While there are promising signs, investors may want to see further evidence of improved performance before the wide discount to net asset value (the value of their properties minus any liabilities) narrows significantly.”

Land Securities Group Shares at midday on Friday they were up 2.8 per cent at 596 pence, although they have fallen about 16 per cent so far this year.