Developer says demand is for multi-let clusters rather than large HQ type space

Landsec has said it will build less in the City and increasingly concentrate on the West End and Southwark in London as a result of different working patterns following the covid-19 pandemic.

The developer behind 20 Fenchurch Street, better known as the Walkie Talkie, said more than three-quarters of its portfolio in the capital was now in the “vibrant West End and Southwark markets”.

It said just 24% was in its traditional heartland of the City, adding that it was “focus[ing] our portfolio on multi-let clusters, mostly in the West End and Southwark”.

Lucent 5

Wates completed work earlier this year on the Lucent scheme behind Piccadilly Lights

The firm, which has appointed Mace to carry out work on the Timber Square scheme in Southwark and McLaren to refurbish a 1960s block in Victoria called Portland House, now renamed Thirty High, said: “[Following the pandemic] we expected overall demand for UK office space to reduce as a result of more flexible ways of working but that this would mostly impact large HQ type space and areas which lack the amenities to make people want to spend time there.

“The fact that we have started to see several high-profile announcements of, for example, major banks reducing their floorspace and relocating to different parts of London therefore does not come as a surprise to us. Indeed, this is why virtually all of our office disposals over the past three years have been large, single-let HQ buildings.”

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The next two schemes on Landsec’s blocks are a mixed-use project called The Liberty of Southwark, designed by Allies and Morrison, and the BIG-designed Red Lion Court, which will replace a 1980s office building on the banks of the river Thames also in Southwark.

Landsec said occupiers were wanting “buildings with the best sustainability credentials, transport connectivity and local amenities to make key talent want to spend time in the office”. It added: “Space which does not meet all these criteria is at risk of becoming obsolete.”

The number of people going back into its buildings was 10% up in the six months to September, it said, compared to the previous six months and 22% up year-on-year.

Its recently completed schemes this year include the n2 building in Victoria, finished by Mace, and Wates’ Lucent building behind Piccadilly Lights.

Higher interest rates hit the value of Landsec’s property valuations meaning pre-tax losses for the half-year remained flat at £193m.