UPDATE: Land Securities Restarts Retail Developments

21st Jul 2010 10:19

(Adds detail, comment.) By Anita Likus Of DOW JONES NEWSWIRES LONDON (Dow Jones)--The U.K.'s largest real estate investment trust, Land Securities Group PLC, (LAND.LN) Wednesday became the first property company to put a large scale retail project back on the agenda since the industry was hit by the credit crunch and subsequent recession. Land Securities said it is progressing its GBP1 billion building pipeline with the development of the GBP350 million Trinity Leeds shopping center, having pre-let 43% of the shopping center's 750,000 square feet. The move is part of Land Securities' wider strategy to grow its retail portfolio, as revealed to Dow Jones in March. The plans come amid improving market conditions, with falling vacancy rates and fewer units in administration, and despite fears that the U.K.'s real estate market is heading for another dip. U.K. landlords and developers have just come out of one of the worst downturns in decades, as a lack of finance following the credit crisis stifled demand for real estate and builders stopped developments. But just as real estate companies are ready to commit to new assets and developments, fears that the U.K. government's Autumn spending review could dampen consumer confidence and spending appetite once more are threatening the fragile recovery in the market. Still, Chief Executive Francis Salway reiterated his outlook of medium term recovery in property values "interspersed by ripples." "We see strong investor demand in some sub-markets, but early evidence of price resistance in others. We will continue to play any such imbalances to our advantage," he said. Real estate capital values turned a corner in August last year, having fallen some 45% peak to trough, but growth is easing again, according to the Investment Property Databank, which recorded a 0.5% increase in property values in June. IPD's Managing director Phil Tily said that "after a volatile three years fundamentals driving property markets are finally appearing to be moderating," but he cautioned that "whether this proves to be the calm after a very long storm of course depends upon the course of the domestic economy and the impact that will have on both domestic and overseas investor confidence." Trinity Leeds, which is due to open in Spring 2013 has attracted new flagship stores for TopShop/TopMan, H&M, and Next, to join Marks & Spencer and Boots who had already signed up for space at the shopping center. Land Securities also plans to expand its portfolio by taking advantage of banks selling properties, which it expects will start happening next summer and is progressing three developments in the West End as well as talking to a possible joint venture partner to restart its 20 Fenchurch 'Walkie Talkie' project in London's financial district, the City. Land Securities achieved GBP4.6 million of development lettings in the first quarter with a further GBP3.8 million in solicitors' hands while vacant space fell to 5.7% from 5.9% at March 31. Units let on a temporary basis account for 1.1% of vacancies and units in administration fell to 0.8% from 1% reported in March. At 0836 GMT Land Securities shares were up 11 pence or 1.9% at 592 pence in a higher London market. Analysts welcomed the update and Evolution Securities analyst Alan Carter said it is "reasonable upbeat" while JP Morgan analyst Harm Meijer said the company is "delivering as you like to see in the current market." Land Securities shares have fallen 13% in the year to date on fears that U.K.'s recovering property market will take another hit. -By Anita Likus, Dow Jones Newswires; +44 20 7842 9407; [email protected] (END) Dow Jones Newswires July 21, 2010 05:19 ET (09:19 GMT)