Landsec “confident” to invest in retail sector
Landsec has said it is “confident” in deploying further capital into the retail sector in the coming months.
The real estate investment trust – which earlier this year acquired an additional £120m stake in Bluewater in Kent – said it sees the “most-attractive risk-adjusted returns” in retail, where income returns are in the high single digits and rents are growing.
However, the group said that new supply is “non-existent” and that for the best assets, capital expenditure which does not add value is low, at around 20 basis points of the overall asset value.
This comes as Landsec releases a report for the first half of the 2024 financial year, a period during which it recorded a pre-tax profit of £243m, up from a loss of £193m the previous period.
During the period, which covered the six-month period ending 30 September, Landsec said it had capitalised on a continued focus from brands on fewer, but bigger and better stores. This resulted in upsizes and lettings from the likes of Primark, Pull&Bear, Bershka, Sephora, and JD Sports across its portfolio.
The group’s occupancy across its retail portfolio is now higher than it was before the Covid pandemic, up 70 basis points to 96.0%, with £26m of leases signed or in solicitors’ hands, 7% ahead of estimated rental value.
Mark Allan, chief executive of Landsec, said: “Our operational outperformance continues, with further growth in occupancy and positive rental uplifts across our retail and London portfolio, which is translating into accelerated income growth.”
He added: “Property values have stabilised, with growth in rental values driving a modest increase in capital values, resulting in a positive total return on equity. We expect these trends to persist, as customer demand for our best-in-class space remains robust and investment market activity has started to pick up. We have continued to reposition our portfolio towards higher-return opportunities and are confident of deploying further capital towards this in the second half. Having managed our balance sheet well as markets corrected, we are now well placed to deliver growth and attractive returns.“
In May, Landsec said it will focus on acquisitions for the remainder of 2024, as it looked to invest funds it has accrued through disposals.