Rosalind Evans
In the dynamic landscape of London’s real estate, Landsec, one of Britain’s leading property developers, is making a strategic shift. The company is moving its focus from the traditional business districts in the City of London to the more vibrant and diverse areas of the West End. Evolving tenant preferences and the shifting dynamics of office space usage in a post-pandemic world drive this change. The company’s CEO, Mark Allan, has highlighted the growing demand for locations that offer a mix of shopping, leisure, and excellent transport links, catering to a more lifestyle-centric approach to workspace locations.
The report outlines this significant transition in Landsec’s portfolio management. Since 2020, Landsec has sold properties worth £2.5bn, primarily office buildings in the City, like the Deutsche Bank and Deloitte headquarters. This move has significantly increased their holdings in the West End and Southwark to 76%, starkly contrasting to the 58% in 2020, while their City assets have decreased to 24%.
CEO Mark Allan attributes this shift to the desire for ‘vibrant’ neighbourhoods. He notes, “People want to spend time in neighbourhoods where a lot is happening.” With their mix of tourism, shops, and leisure activities, this preference for the West End and South Bank reflects a departure from the traditional office-centric areas of the City and Canary Wharf.
The rise of hybrid working models has also played a role in this shift. Companies like HSBC and Clifford Chance are moving towards smaller office spaces, which in turn is creating vacancies in previous corporate headquarters. This change affects office prices, with a 25% average fall in the City and a 10%-15% drop in the West End from their peak. Landsec anticipates further declines, depending on interest rate trends.
Vacancy rates in London offices vary widely, from 4% in the West End to over 20% in Canary Wharf. With the Bank of England maintaining interest rates at 5.25%, the highest since 2008, and possible rate cuts expected next year, Landsec is poised to capitalize on buying opportunities.
In retail, Landsec’s shopping malls like Trinity Leeds and Bluewater are shifting from online to physical sales. Retailers focus on ‘fewer, bigger, better’ stores, as evidenced by 25 new brands in Landsec’s centers and expansions by Marks & Spencer and Uniqlo.
Despite these strategic moves, Landsec reported a pre-tax loss of £193m in the six months to September 30, with a £375m fall in its portfolio value. The company plans to sell £1.5bn of its properties, continuing its restructuring initiated three years ago.
Landsec’s strategic pivot reflects a broader transformation in the commercial real estate sector, where the emphasis on vibrant, mixed-use neighbourhoods aligns with contemporary lifestyle and work preferences. This shift, while challenging, positions Landsec at the forefront of a changing landscape, adapting to the new realities of how people live, work, and shop in a post-pandemic world.
