Land Securities shifts focus from offices to rental homes

Landsec, one of the UK’s largest property companies, is undergoing a significant transformation under the leadership of its chief executive, Mark Allan. Traditionally known for owning vast office spaces and major retail centres such as Bluewater in Kent and Gunwharf Quays in Portsmouth, the company is now pivoting towards the residential market. By 2030, Landsec aims to equally divide its £10 billion property portfolio between offices, retail, and residential properties.

This strategic move comes as the commercial property sector faces increasing pressure. Offices and shopping malls, which were once the backbone of the industry, have seen their performance decline in comparison to alternative assets such as warehouses and student accommodations. Mark Allan has sought to address these shifting trends, leveraging his prior experience at Unite Students and St Modwen, where he successfully focused on high-demand sectors including residential housing and logistics.

As part of this new approach, Landsec plans to offload approximately £2 billion worth of office assets to fund its expansion into rental housing. Allan has already overseen similar disposals during his tenure, but the landscape has since changed, with high interest rates affecting commercial property values and limiting buyer activity. However, he remains optimistic about laying the groundwork for these sales in the coming years to fund the development of major residential projects.

Landsec’s residential initiatives include three key “mixed-use regeneration projects” in Manchester’s Mayfield district, the O2 Centre in Hampstead, and Lewisham shopping centre in South London. Across these locations, the company aims to deliver as many as 6,000 homes, with the first units in Hampstead expected to be ready by 2028. To accommodate these developments, adjustments have been made to increase the number of residential units initially envisioned for these sites.

In addition to its residential shift, the company remains committed to high-performing retail properties. Late last year, Landsec acquired Liverpool One, a prominent “destination” shopping mall, for £490 million. Allan believes that rents for high-quality retail centres have now stabilised after years of decline and anticipates renewed growth in this segment. This strategy aligns with retailers’ focus on flagship stores in fewer but higher-profile locations, which Landsec sees as a key opportunity for profitability.

By diversifying its portfolio and capitalising on the housing shortage in the UK, Landsec intends to increase its earnings by 20% by 2030. Allan is confident that the combination of residential, retail, and remaining office assets will offer shareholders a compelling investment opportunity. He expects annual earnings growth of around 4% over the next five years, building on the current earnings yield of approximately 9%. Through this pivot, Landsec seeks to remain flexible and align itself with emerging market trends, future-proofing its portfolio for long-term stability and growth.