Safe as houses? Landsec bets on build-to-rent
Property investment group Land Securities – known as Landsec – has turned away from offices and towards housebuilding in a major pivot.
It said long-term demographic trends made housing a better bet than the cyclical office market, which is set to slow from its current high growth rate as supply constraints ease
The company’s chief executive, Mark Allan, said he wanted to ensure the growth outlook for Landsec’s portfolio in three years’ time is “as positive as it is for our current portfolio today”.
The FTSE 100 firm plans to establish a £2bn residential platform by 2030, to be funded by rotating the money of capital out of offices, non-core investments and low or non-yielding pre-development assets.
It will also increase investment in major retail developments by £1bn.
Landsec now has an “attractive pipeline” of more than 6,000 homes across three schemes in Manchester and London, which the company hopes will deliver over £200m of annualised net rental income in the next decade.
It has outline consent for 1,800 homes in Finchley Road – and planning consent for the first 600 – along with a development agreement for 1,700 homes in Manchester.
The company has also submitted a planning application for 2,800 homes in Lewisham, with a planning decision expected in the second half of the year.
Demand for homes in the UK has been consistently driving up house prices, along with significant supply constraints – Britain today has a backlog of 4.3m homes.
Despite the ever-increasing price of a home, higher wages have been supporting house-buying for the past few years, as well as still-affordable houses in areas of Scotland and the north of England.
“The growth in demand for homes… is underpinned by long-term demographic trends. This means residential income and values have been much less volatile historically and we expect this to remain the case going forward,” Landsec said.