Landsec will pledge to focus investment on major retail centres while curtailing new development as it hosts a capital markets event at its Liverpool One shopping centre today.
In a stock market announcement ahead of the presentation, the UK real estate investment trust with a £10 billion portfolio said it had sold £295 million of offices, well ahead of schedule, and intends to accelerate further capital recycling over the next 12 to 18 months, to reinvest in major retail schemes.
As reported by CoStar News, it has a string of London offices up for sale at present as it refocuses the business towards retail and residential.
In the statement today, Landsec described major retail as its highest conviction call "given the superior income returns and attractive growth in income". Opportunities for major shopping centre acquisitions include Merry Hill in the West Midlands, which is being sold by Knight Frank as a single asset seeking in excess of £265 million.
Landsec said that, in prioritising its capital allocation, it does not plan to commit any meaningful capital to new development projects in the near term. As a result, its committed development pipeline is expected to reduce to £0.2 billion by mid-2026.
Landsec said it has made good progress in capital recycling, with £644 million of low-returning assets sold or in legals since March, principally comprising the sale of the QAM offices in London for £245 million.
It has also sold a £50 million City office, which generated a net income yield of 5.1%, and disposed of four retail parks for £261 million, one of which is in legals, which generated a slightly higher income return of 6.4%.
There was also the sale of two pre-development assets for £72 million, one of which is in legals. Landsec said investment activity in London offices is gradually recovering from a low base as estimated retail values continue to grow.
Elsewhere today, Landsec will say the performance of its major retail platform is expected to contribute strongly to its earnings per share growth, both in the short and for the longer term.
Since its full-year results in May, Landsec has seen good momentum on its primary financial objective of delivering sustainable income and earnings per share growth. It said this is underpinned by the ongoing strength in occupational demand across its central London and major retail portfolios, as the "focus from customers on the best quality space remains unabated".
This has been particularly pronounced in major retail, where leases signed and in solicitors' hands for the year to date are on average 12% above estimated rental value, it says.
Rental uplifts on relettings and renewals continue to grow relative to previous passing rent, up to 13% for the year to date, compared with 7% for FY25 and 1% for FY24. This is underpinned by strong growth in retail sales, which at 8.3% over the five months to August was materially ahead of the national average of 2%, and strong growth in footfall, which at 4.9% was also ahead of the UK average of 1%.
In central London, leasing remains robust Landsec adds, with leases signed and in solicitors' hands 9% above ERV and relettings/renewals 6% above previous passing rent.
The REIT sees significant income growth potential in major retail, with Landsec expected to share further insight today into how it will deliver significant growth in net rental income from its existing major retail portfolio by full year 2030.
This includes 3-4% growth a year from capturing the growing reversionary potential across its portfolio and growth in turnover income. Growth in commercialisation income, such as digital media, events, brand activations and EV charging, is expected to add 0.5-1% per annum. In addition, the investment in up to £200 million of smaller, high-yielding capex projects is expected to add on average 1-2% of growth per annum.