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Landsec pushes on with £400m office refurb amid ‘strong’ demand

Landsec has committed to its £400m office refurbishment in Victoria, SW1, citing “strong” demand for best-in-class space and rental growth at its Victoria properties.

The owner said occupancy in its central London portfolio has increased by 100bps to 96.9% since the end of March, with £17m of lettings signed or in solicitors’ hands. This was 3% ahead of ERV on average.

Landsec added that its entire office estate in Victoria, which makes up nearly half of its central London business, is “100% full” and that rents are “continuing to grow”.

Its recently completed development at n2 in Victoria is now 80% let, with the remaining 20% in solicitors’ hands – up from 66% let and 6% in solicitors’ hands in May. Meanwhile, its Lucent scheme in Piccadilly Circus, W1, is 62% let with a further 14% in solicitors’ hands, compared with 19% and 53% in May. Rents across both schemes are more than 10% ahead of initial assumptions.

Landsec began works on Thirty High, formerly Portland House, in February earlier this year. It is expected to complete in the summer of 2025.

The total development cost for the refurbishment is estimated to be circa £400m, with a gross yield on cost of around 7.5% and a gross yield on circa £240m capex investment of more than 12%.

Chief executive Mark Allan said: “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.

“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.”

The news comes as analysts at investment bank Jefferies downgrades the stock of office landlords including Landsec, British Land, Derwent London and GPE.

See also: How Landsec is targeting opportunities in a ‘new reality’ market

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Image © Landsec

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