The real estate company has stated that, until the two jobs set to finish next year have signed up tenants, they will not start any speculative office schemes in London
The announcement comes within the company’s annual results, published last week.
Previously, they have also announced a scaling back of the number of office jobs being taken on.
Two office construction jobs to be completed
The two jobs that the company wants to complete first are Thirty High, a refurbishment by McLaren of an old office block originally built in the 1960s, and the Timber Square scheme by Mace, worth £400m.
In the office building pipeline, Landsec has Red Lion Court worth £200m in Bankside with Mace, Hill House worth £250m with Skanska, and 55 Old Broad Street with Keltbray.
Landsec have announced that they intend to shift from office buildings to residential, investing in retail and creating a residential platform worth over £2bn by 2030. This will also mean slowly moving £3bn of capital out of offices, non-core investments, and low or non-yielding pre-development assets.
“We continue to carefully weigh risks and returns on any new schemes”
The Landsec annual results say: “Whilst demand for office space remains good, the build cost inflation over the past few years, continued challenges in supply chains and higher exit yields have put pressure on development returns, despite growing rents.
“This impacts office development more than residential, so we continue to carefully weigh risks and returns on any new schemes, but in any case, we do not plan to commit to any new speculative London office projects until we have secured the majority of the £61m ERV (estimated rental value) on our existing projects.”
“Both developments are expected to complete over the next 12 months and we are starting to see good customer interest emerge. We expect this will translate into progress on pre-lets in the second half of the year for both schemes, as high-quality, sustainable office space in locations with good transport connectivity and attractive amenities remains in scarce supply. However, as both schemes are designed to be multi-let, the majority of lease-up is expected to occur post completion.”
Mark Allan, chief executive of Landsec, said: “Our portfolio again delivered very strong performance with like-for-like net rental income growth of 5.0%, supporting growth in both earnings and portfolio valuation over the year. Owning the right real estate has never been more important and, with a very healthy pipeline of occupier demand, this trend looks set to continue, providing a clear trajectory for further near and medium-term EPS growth.”
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