Land Secs foresees ripples in weaker sectors
Two major listed property companies have issued results this week. Land Securities said its adjusted diluted NAV per share had risen 6.7% in the half-year to 30 September, to 737p, and said rental values had risen 1.1% across its portfolio during the period. The group noted that market conditions were slightly more favourable than it had expected, but added that it was sticking to its medium-term forecast of a recovery in property values, “albeit interspersed with ripples”.
“We believe any ripples are more likely to occur in sectors with weaker occupier demand, and we are reassured by the relative strength of our own core sectors of focus, which are London offices and good-quality retail properties,” said chief executive Francis Salway.
The group had forecast that the recovery in commercial property would be in two stages – firstly yield repricing and secondly growth in rental values. The first stage has taken place and the recent trend of rising capital values is flattening out, while occupier demand from large corporates is improving – slightly ahead of the group’s expectations – and leasing activity is now improving too.
Land Securities has responded by starting developments in its London portfolio on a speculative basis, “to allow us to secure leases at higher rents around the time of scheme completion”. Within the retail sector, the group expects resumed growth in rental value at a later stage, and at more moderate levels, so is only taking developments forward “once they are grounded on substantial pre-lettings”.
Meanwhile Great Portland Estates has reported adjusted NAV up 11% to 314p per share for the half-year to 30 September, with similar growth in adjusted pre-tax profit to £15m. The group’s portfolio valuation rose 7.3% during the half-year and rental value growth was 5.1%, with GPE’s West End offices portfolio up 6.9% and its West End retail properties up 3.0%.
Toby Courtauld, chief executive, said: “Growth rates in London’s investment markets have slowed, as expected, over the past four quarters. Whilst there continues to be a surfeit of buyers over sellers, particularly from overseas, we believe these more sedate conditions will persist into 2011 as the uncertain macro environment will continue to affect sentiment in the short term. Looking ahead, we remain confident that London will retain its status as a leading financial centre.”
The group said it had been encouraged by tenant demand and reported another quarter of good letting activity. “This bodes well for our 1.8m sq ft near-term development programme, where we expect to start seven schemes during 2011 to add to the four currently on site.”
