LandSec says demand holding up despite rising rates

Property developer Land Securities reported a rise in lettings over the first five months of the financial year as demand for office space held up, despite rising interest rates.

The company on Wednesday said occupancy in the its central London portfolio increased by 100 basis points to 96.9%, with £17m of lettings signed or in solicitors' hands.

In Victoria, which makes up nearly half of Landsec's central London business, the company's existing office portfolio is now 100% let, it added in a trading update.

The recently-completed development at n2 is now 80% let with the remaining 20% in solicitors' hands, while its Lucent building is 62% let with a further 14% or in solicitors' hands.

"Reflecting the strong demand, rents across both schemes are more than 10% ahead of initial assumptions," the company said.

Landsec added that it had now committed to the start of Thirty High - formerly Portland House - which is expected to complete in the summer of 2025. Total development cost for refurbishment of the building is estimated at £400m, with a gross yield on cost of 7.5% and a gross yield on the £240m capex investment of more than 12%.

"Over the past year, we have been decisive in positioning the business for a higher for longer interest rate environment. Our disposal of £2.2bn of mature, mostly single-let offices, predominantly in the City, before the start of this financial year has proven very timely," said chief executive Mark Allan.

" As such, we have flexibility to respond to the opportunities that will start to arise from the adjustment to a higher rate reality, as it remains clear that customer demand for the most sustainable, high-quality space in the best locations remains resilient."

Reporting by Frank Prenesti for Sharecast.com