Landsec, one of the leading property companies in the UK, is preparing for a recovery after a challenging year that ended on March 31. In its annual results statement, the company announced its plans to sell its retail park portfolio as part of its long-term growth strategy. CEO Mark Allan expressed confidence in the government’s economic support measures and the successful vaccination program, which he believes will contribute to a strong consumption-led recovery in 2021 and 2022.

However, Landsec’s recovery efforts will come at a cost as the company aims to reduce its net debt of £3.5 billion. To achieve this, Landsec plans to dispose of approximately £4 billion worth of assets in the coming years. The focus will be on selling prime central London assets and assets in sectors where the company has little competitive advantage, such as retail parks.

The impact of the pandemic and associated restrictions was evident in Landsec’s financial results for the year to March 2021. Revenues decreased by 39.4% to £251 million, leading to a pre-tax loss of £1.39 billion, which is wider than the loss of £837 million in the previous year. Like-for-like net rental income also fell significantly by £165 million, or 30.4%, and the overall portfolio value declined by 13.7% to £10.8 billion. Regional shopping centers experienced a significant decrease in value, with an average decline of 38.2% to £1 billion since their peak, representing a decline of approximately 60%.

Despite these challenges, Landsec remains in a strong financial position. CEO Mark Allan highlighted the company’s clear strategy, which revolves around four priorities: reshaping the portfolio, optimizing the Central London portfolio, reimagining retail, and driving successful outcomes in a multi-channel world. Allan acknowledged that the pandemic has accelerated the shift towards online channels in the retail sector. However, he believes that physical retail spaces still play an important role in the omnichannel world by offering experiences that cannot be easily replicated online.

Since the lifting of non-essential retail restrictions in April, Landsec has already seen a strong performance in England. Sales in shopping centers are up 5% compared to 2019, and outlets have seen a 14% increase during the same period. The company has also secured new leases and store openings with over 50 retail brands, underscoring the significance of physical stores in brand partner strategies.

Nevertheless, Allan acknowledged that the near-term outlook for retail, particularly shopping centers, remains challenging. Landsec expects an increase in insolvency processes among occupiers as government support gradually decreases. However, this presents opportunities for new brands, including digitally native ones, to occupy space and improve the long-term prospects of Landsec’s retail assets.

Allan expressed optimism about the return of in-person shopping as lockdown measures ease and believes that this excitement will contribute to a strong rebound for Landsec’s retail assets. However, the recovery of footfall in central London may take longer due to concerns about tourism, uncertain office working patterns, and the safety of public transport.

Overall, Landsec is well-positioned for recovery and is focused on reshaping its portfolio, positioning itself for growth, and reimagining retail in a rapidly evolving landscape. With a clear strategy in place and the ongoing support of the government and a successful vaccination program, Landsec is optimistic about its prospects in the coming years.

Useful Links:
Landsec Official Website
UK Government Official Website