Land Securities' profits double on the back of office shortages

The property developer Land Securities has capitalised on a chronic shortage of office supply in London to more than double its pre-tax profit to £2.4bn.

The UK’s largest listed commercial property company toasted success not just in the capital in the year to 31 March, but across the regions where it invested in retail real estate.

However, its chief executive, Rob Noel, highlighted the booming office market in London as a star performer for the business, which posted a 25.6 per cent rise in basic net asset value per share to 1,343p.

Its results came as research from property agent DTZ revealed that London’s West End remains the world’s most expensive location for office space, at $29,000 (£18,701) per workstation, up 11 per cent on a year ago.

The price means it is now nearly a third more expensive than second-placed Hong Kong, and that one workstation in London is equivalent to 11 workstations in Lisbon, the cheapest European office market in DTZ’s ranking.

This is despite a global fall in the cost of office space of 4.4 per cent. Of the 132 other cities surveyed by DTZ over 2014, Moscow saw the sharpest fall in prices, down a third, although rental prices also dropped in New York (down 13 per cent), Canada and Australia.

Land Securities’ profits were the culmination of a five-year plan to invest in areas of London where a shortage of office stock was expected such as Victoria and the City.

The developer behind the Walkie Talkie skyscraper signed up companies such as Gucci-owner Kering and Jupiter Asset Management as tenants during the period.

Mr Noel said: “In London, we reached the peak of construction activity in our development programme during the year. Our programme has been sized and timed to deliver highly efficient and technically resilient office space into a supply-constrained market.”

Its performance was praised by the City as its shares surged 3.97 per cent or 52p to 1,363p.

An analyst note from Stifel said: “Looking forward we expect the driver to continue being London offices and completion of the development pipeline (1.5m sq ft being delivered in the capital over the next 18 months).”

Mr Noel added he believes that as supply continues to be squeezed, rents in both the City and West End will keep rising. Meanwhile, in its retail division, Land Securities said it believes the market will remain more challenging.

It said it has transformed its shopping centre portfolio to focus on “dominance, experience and convenience”, and sold some properties that did not fit in the category.

During the year it acquired a 30 per cent interest in the Bluewater shopping centre in Kent and took full ownership of Buchanan Galleries in Glasgow.