Landsec steps up capital recycling to reinvest in major retail

(Sharecast News) - Shares in Landsec were on the rise on Tuesday after the real estate group delivered a confident outlook, hailing the "significant" potential for income growth in the so-called major retail market. At a capital markets day for investors, the company said it will accelerate its capital recycling programme over the next 12-18 months, selling office assets to reinvest in shopping centres and retail parks.

The company, whose large-scale shopping centres include Bluewater in Kent, One New Change in London and Trinity in Leeds, has so far sold £644m of offices and low-returning retail assets since March.

"Given the superior income returns and attractive growth in income, [major retail] remains Landsec's highest conviction call, so in prioritising its capital allocation, the company does not plan to commit any meaningful capital to new development projects in the near term," Landsec said. "As a result, its committed development pipeline is expected to reduce to c. £0.2bn by mid-2026."

Since reporting its full-year results in May, the company said it has seen "good momentum" in income and profit growth, particularly in major retail where signed leases are 12% higher than estimated rental values, with relettings/renewals seeing rental uplifts of 13%. In London, signed leases over the year-to-date are 9% above ERV, with relettings/renewals 6% above previous passing rent.

Landsec said it remains on track to hit guidance of 3-4% in like-for-like net rental income and 2-4% growth in earnings per share this year. Looking further ahead, the company is targeting 4.5-7% CAGR in net rental income from its existing major retail portfolio by FY30.

Shares were 3.6% higher at 583.5p by 1440 BST.