Land Securities is raising expectations as the commercial real estate group recovers and turns a profit

Bluewater Shopping Center owner Land Securities has raised its full-year outlook after a return to profit in the first half.

The commercial property investment trust reported £243 million in pre-tax profits for the six months ended September 30, compared with a loss of £193 million for the same period last year.

Like-for-like rental income increased by 3.4 percent, driven by occupancy rates that exceeded pre-pandemic levels in key stores and reached a record 97.9 percent in the Central London portfolio.

A 10 percent drop in overheads also meant the group expects its profits to be in line with the 50.1 pence per share it achieved last year.

The valuation of LandSec’s real estate portfolio also rose 0.9 percent, helped by stabilizing returns and stronger activity in the investment markets.

The FTSE 100 company told investors: ‘Demand for modern, sustainable office space in London remains strong, and in retail, brands continue to focus on fewer, but bigger and better stores in key locations.’

During this period the company agreed a deal that allowed retail giant Primark to almost double its space at the White Rose Center in Leeds from 37,000 to 71,000 sq ft.

In addition, cosmetics brand Sephora and Inditex-run labels Bershka and Pull&Bear opened branches in Bluewater, while JD Sports launched a major new store in St David’s shopping center in Cardiff.

LandSec expects its retail portfolio to grow in the second half of the year, on track to deliver low-to-mid percentage growth in rental values ​​this fiscal year.

CEO Mark Allen said: ‘We have continued to reposition our portfolio towards higher return opportunities and are confident we will deploy further capital in the second half of this.

‘Having managed our balance sheet well after the markets corrected, we are now well positioned to deliver growth and attractive returns.’

The UK commercial property sector remains under pressure due to high interest rates and the rise of working from home since the start of the Covid-19 pandemic.

According to MSCI, the UK office market recorded just €4.2 billion in transactions in the first six months of 2024, the weakest performance since the finance company started tracking the data in 2001.

Russ Mould, investment director at AJ Bell, said the company’s trading update was “not only notable for the profit improvement it contained, but also for the optimistic tone the company adopted.”

He added: ‘While there are promising signs, investors may want to see further evidence of improved performance before the large discount to net asset value – the value of the properties minus any liabilities – meaningfully narrows.’

Land Securities Group Shares were 2.8 percent higher at 596p on Friday afternoon, although they are down about 16 percent so far this year.