Landsec to fund housing development drive with £2bn office sell-off

Landsec is planning major sales of its office portfolio to fund its pivot toward housing development, which it believes will offer higher structural growth and lower volatility.

The FTSE100 landlord plans to establish a £2bn+ residential platform by 2030, according to its latest results.

Accounts for the year to 31 March 2025 said Landsec would fund the strategy by rotating £3bn of capital out of “offices, non-core investments and low or non-yielding pre-development assets”.

Regarding offices specifically, Landsec said it aimed to reduce its capital employed in the sector by £2bn over two to five years.

Landsec said it was “very confident in the near term income growth prospects of our high-quality London office assets”, but that longer term there were “fewer supply constraints, and demand and hence rents are likely to be more cyclical”.

“The growth in demand for homes, however, is more structural, as it is underpinned by long-term demographic trends,” it said. 

“This means residential income and values have been much less volatile historically and we expect this to remain the case going forward.”

The firm has three major housing-led schemes in the pipeline. It started on infrastructure works and completed demolition on the first phase of its consented 1,800-homes Finchley Road scheme in north London.

>>See also: Landsec puts £200m Bankside office on hold 

Detailed planning for the first phase of its planned 1,700-home Mayfield scheme is expected in the second half of the year, with delivery to begin from 2026 onwards.

A decision on a planning submission for a 2,800-home masterplan in Lewisham, south London is also expected.

The landlord also set out plans to increase investment in major retail by a further £1bn over the next one to three years.

The business invested £600m of capital in two retail assets, Liverpool ONE and Bluewater, in the past year, and sold £0.4bn of “ageing hotels with a substantial capex bill looming”.

Revenue was up marginally from £824m to £842m and the company flipped from a pre-tax loss to profit.

Pre-tax profit stood at £393m, which was driven largely by rising property valuations. The net surplus on revaluation of investment properties in the period was £91m, compared to a deficit of £628m last year, which resulted in a £341m loss.

Allan said: “Our portfolio again delivered very strong performance with like-for-like net rental income growth of 5.0%, supporting growth in both earnings and portfolio valuation over the year. 

“Owning the right real estate has never been more important and, with a very healthy pipeline of occupier demand, this trend looks set to continue, providing a clear trajectory for further near and medium-term EPS growth.”