Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Commercial landlord Land Securities says London office rents are rising quickly, with property valuations steady, as it prepares to sell £2bn of office blocks to fund a pivot into residential property.
The FTSE 100 landlord reported net rental income growth of 6.6 per cent in the year to March, on a like-for-like basis, across its £6.7bn central London portfolio of mostly City and West End offices.
“In London, office utilisation across our portfolio continues to grow,” Landsec chief executive Mark Allan said. “In the near future, new supply across London is modest, so we expect our rental values this year to continue to grow at a broadly similar rate.”
Allan faces a daunting task to sell about £2bn of office blocks over five years to generate cash to buy and build thousands of homes, which he sees as a more attractive investment generating steady income. He said he expected these sales to start in 2026.
Office dealmaking remains at the lowest level since the global financial crisis, with very little liquidity for blocks worth more than £100mn. Deal volumes fell 18 per cent across Europe in the first quarter, according to data group MSCI, as a recovery in the wider commercial property transaction market stalled.
Investors have been wary of buying office buildings since the pandemic and the rise of hybrid working, while the post-Covid rise in interest rates slashed property values across the sector.
“Offices are in an investment market trading vacuum [above] £100mn, so portfolio valuations are more subjective,” Jefferies analyst Mike Prew said in a note ahead of Landsec’s report. He warned that the pivot into residential “could be slow to execute organically”.
Landsec share were down about 2 per cent in early London trading.
Allan cited recent joint venture deals by Norway’s oil fund with Grosvenor and Shaftesbury Capital as examples of investors looking to “acquire really scarce real estate in central London at a really attractive point in the cycle if you look at it on a long-term basis”.
Landsec said its £10.9bn portfolio, which also includes major shopping centres and a mix of other properties, increased in value by 1.1 per cent in the year to March, according to an independent valuation.
This continues a slow improvement in property values after a brutal two years during which prices fell about 25 per cent on average across Europe, according to Green Street analysts.
Allan is also making a big bet on the top tier of shopping centres — with large deals at Liverpool One and Bluewater last year. He argues these properties have strong demand from retailers but no new construction.
Landsec swung from a loss of £341mn in 2024 to a pre-tax profit of £393mn in 2025, driven by the rising property valuations.
