Landlord in red as office values slump

oNe of britain’s biggest landlords tumbled into the red as the value of its London offices plummeted.

Land Securities yesterday reported a half-year loss of £192m amid signs that higher interest rates are taking their toll on commercial property.

The FTSe 100 giant said its portfolio of offices, shops and other buildings fell by 2.9pc to £10.9bn in the six months to the end of September, with its central London estate driving the decline.

The value of its City offices dived 9.7pc to £1.7bn while those in the West end were down 4.2pc at £2.8bn.

by contrast, the value of its shopping centres – including Trinity Leeds and Gunwharf Quays in Portsmouth – rose by 1.1pc to £1.2bn. Shares fell 1.3pc, or 7.8p, to 616p.

Land Securities chief executive mark Allan said: ‘market conditions have changed considerably over the last two years and especially since the start of this year. Interest rates across the board have surged in response to rising inflation, with the central bank support that artificially depressed these for most of the past decade now in reverse.

‘ It is difficult to assess where interest rates will settle in the medium term, but it seems clear that in a long term context, the ultra-low rate environment of the past decade was the aberration – not the adjustment we have seen this year.’

Allan warned that hybrid working in the wake of the pandemic was also hitting the commercial property market.

‘We expect more flexible ways of working will reduce overall demand for office space in the UK,’ he said.

‘We expect large HQ type space and areas which offer little reason to visit beyond doing a job to see a much bigger impact than places which offer exciting amenities for people to give them a reason to want to spend time there.’

Colm Lauder, an analyst at stockbroker Goodbody, said worse was to come for the commercial property sector.

‘The pain that is coming through in the second half is going to be significantly worse,’ he said.