Land Securities Vacancy Rate Rises on U.K. Economic Woes
Land Securities Group Plc (LAND), the U.K.’s largest real estate investment trust by value, said property vacancies rose in the first quarter as the number of visitors to its shopping malls declined by 2.8 percent.
The vacancy rate rose to 3.2 percent at the end of June from 3 percent at the end of March, the London-based company said in a statement today.
“We will continue to be risk aware, but not risk averse,” Chief Executive Officer Rob Noel said on a conference call. “While the market is challenging, we remain confident in our position.”
Share price gains by U.K. real estate companies this year are “unsustainable” because of a deteriorating retail industry, Societe Generale SA said yesterday. Consumer spending in Britain will grow 0.1 percent this year and 1.3 percent next year, PricewaterhouseCoopers LLP said July 12. The U.K. economy entered its second recession in three years in the first quarter.
Land Securities was down 0.6 percent at 776 pence as of 11:04 a.m. The stock has risen 22 percent this year, giving the company a market value of 6.05 billion pounds ($9.43 billion).
The amount of empty retail space owned by Land Securities’ outside London was unchanged at 3.6 percent through March. In the U.K. capital, where the company holds offices and shopping malls, vacancies increased to 2.9 percent from 2.5 percent at the end of March.
“It’s not a pretty sight for retailers out there,” Noel said on the call. “They’re trading against all elements at the moment. The key is to have the right locations.”
Land Securities will try to attract more mid-market retailers to its One New Change mall in the City of London financial district rather than luxury brands, he said.
The first dividend payment for the current financial year will be 7.4 pence a share compared with 7.2 pence in the same period in 2011, Land Securities said.
The Walkie-Talkie skyscraper, which Land Securities is building in a joint venture with Canary Wharf Group Plc, is close to being 19 percent rented out in advance of its April 2014 opening, Noel said. Businesses signing contracts for office space with the company are usually getting a 12-month rent free period in return for signing a five-year lease, he said.
Land Securities plans to complete an office and retail building in the Victoria district near Buckingham Palace next month. More than 40 percent of the 178,000 square feet (16,540 square meter) of office space and all of the shops at 123 Victoria Street have been leased in advance, according to today’s statement.
“Management might just call the cycle right on its office development pipeline,” Alan Carter, a real estate analyst at Investec Ltd., said in a note to investors today. He has a hold recommendation on the stock.
Noel said potential tenants continue to show interest in office space amid negative economic news.
“While transactions are taking longer, occupier interest and intent remains firm as businesses seek out efficient space for their future needs,” the CEO said.
To contact the reporter responsible for this story: Neil Callanan in London at firstname.lastname@example.org.