Land Securities, GPE and Hammerson update the market

Land Securities today said it expected pressures in managing occupancy rates to continue, but noted encouraging levels of enquiries for its London developments and progress in pre-letting its retail developments. The group’s main customer base – large corporate occupiers – has been to its benefit during the current economic uncertainty and “widespread commercial caution”, said chief executive Francis Salway.

The group reported a 16.8% fall year-on-year in first-half pre-tax profit to £378.9m. The group’s measure of underlying pre-tax profit – Revenue Profit – was up 17.2% at £159.3m. Adjusted diluted NAV per share was up 4.5% at 863p and the group said rental values across its portfolio had risen 1.6% in the six months since March. Voids fell during the half-year, with retail portfolio voids declining to 3.6% from 4.7% and in the London portfolio to 3.3% from 3.4%. Units in administration were 0.7% of the total in the retail portfolio (compared with 0.6%) and 0.1% in London (vs. 0.2%).

Land Securities said its developments had continued to make a positive contribution to returns, with a valuation surplus of 6.6% for the half-year compared with a surplus of 1.5% on the rest of the portfolio. The group has started £1.6bn of developments since January 2010 and says more than 50% of this figure has already been de-risked through site sales, pre-lets and residential sales. The group noted it had further capacity to invest in acquisitions.

Mr. Salway noted: “We have consistently stated that we did not expect to see a straight-line recovery in our market and we see no reason to adjust this outlook. We also believe that market uncertainty may well generate buying opportunities, as the balance between buyers and sellers shifts for some property types.”

Great Portland Estates has also reported interim figures this week, showing a 3.9% increase in its portfolio valuation since March and a 30.7% drop in pre-tax profit to £10.4m as a result of its increased development and refurbishment activities. The group said that while the strong demand for London commercial property meant this market had continued to outperform the rest of the UK, “we expect secondary and over-priced assets to see a price correction as buyers become more discerning”.

Chief executive Toby Courtauld noted: “In our occupational markets, unsurprisingly, demand for space has reduced over the last quarter. So too has the level of expected new supply as development finance remains scarce. As a result, once sustainable economic growth returns, an impending supply crunch will strongly favour London’s landlords.” The group expects the West End to perform more strongly than the City over the next few years, for the first time since H2 2010.

Hammerson also updated the market this week on trading: the group said occupancy across its portfolio was 97.1% as of 30 September, compared with 97.2% at the end of June. Footfall across its UK shopping centres was down 1.9% and sales were 3.8% lower during the quarter, but the group said demand from retail occupiers for space had remained encouraging. The number of units in administration fell to 40 from 53 the previous quarter, representing less than 1% of passing rents.

Hammerson noted that while it would continue to seek to recycle capital through disposals, “if there is continuing stress in the eurozone financial system we may see some attractive acquisition opportunities across our markets in 2012”.