Land backs out-of-town sites to shine through the retail gloom

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The Independent Online

Land Securities has announced plans to step up retail developments despite the recent raft of negative news from the high street.

The retail landlord said the sector was going through a period of change, which meant that while some retailers were buckling under the pressure of slumping consumer confidence and a sluggish economy, the stronger ones were growing.

This, it said, was driving demand for retail properties in areas that suffer from a shortage of supply – particularly from food and fashion retailers, including the big supermarkets.

Building on this, Land Securities said it had "identified a £275m, one million square feet pipeline of schemes to satisfy this location-specific demand," especially in out-of-town sites.

The chief executive, Francis Salway, said the group had zeroed in on seven potential projects, and that it would seek to line up tenants in advance to minimise risk at the developments.

"What we have in retail is a period of accelerated change, with some doing well and others not doing well and indeed failing," he explained, adding that "when there is change there is opportunity". "We are absolutely alive to the pressure on the consumer. But do remember that where we are doing developments, we are only doing them where we are getting a significant level of pre-letting."

The development plans came in an update on the company's first quarter, which showed that, despite the grim newsflow from the retail sector, Land Securities had managed to reduce the void level or vacancy rate at its retail portfolio. That figure stood at 4.1 per cent at the end of June, down from 4.5 per cent at the end of March, with temporary lettings accounting for 1.4 per cent of the result.

However, "units in administration increased to 0.9 per cent from 0.6 per cent at 31 March 2011 due to the Focus DIY and Habitat administrations," the company said.

Footfall across its shopping centres between April and June was flat against the same period last year. That compares favourably to national footfall data for the same period, which evidenced a 0.2 per cent decline.

The like-for-like sales performance at its shopping centres was also ahead of national figures from the British Retail Consortium.

Overall, the FTSE 100-listed business, which also saw good progress in its London portfolio, managed to cut its vacancy rate to 3.9 per cent from 4.2 per cent at the end of March. Again, that figure included temporary lets, which accounted for 1 per cent of the overall result.

The City welcomed the update, with analysts at the Espirito Santo bank saying that figures showed that the Land Securities "retail portfolio remains resilient in the face of recent retail failures".

Their counterparts at Evolution Securities were also positive, noting: "While the major London office schemes generate the headlines and the hope, the smaller retail unit is going strong in tough conditions."