UK-based Land Securities says market ‘turned quite sharply’

LONDON: The UK commercial-property market started to recover sooner than forecast, according to Land Securities Group Plc, the country’s largest real estate investment trust.

“The market has turned quite sharply and positively, which has surprised us to a degree,” Chief Executive Officer Francis Salway said today on a conference call.

“The turning point came earlier than we expected and we are just having a short moment when we have got very few sellers."

The London-based company, which has as much as GBP1 billion (RM6.1 billion) available for acquisitions and developments, has made offers or proposals to buy GBP500 million of assets, Salway said on the call. So far, none of them has led to a transaction.

Commercial-property values in the UK rose 1.9% in October from September, the biggest monthly gain since December 2005 and the third straight increase after more than two years of declines, Investment Property Databank Ltd said Nov 16. They’re still down 42% from the peak in July 2007.

Land Securities fell 1.5 pence to GBP7.13 in London trading, extending the decline this year to 15%, the second-worst performance in the FTSE-350 Real Estate Index. The company reported first-half net income of 11.9 million pounds today, compared with a loss of GBP1.73 billion a year ago.

The investment trust plans to spend 380 million pounds on three developments it will start building in London’s West End next year, Salway said. Rents in the district will probably recover more quickly than in other parts of the city, he said.

‘Be Patient’

“We are confident that property values will rise over the next five years,” said Salway. “We are prepared to be patient for the best opportunities and we will not rush into our investment program.”

The company’s properties lost GBP117.8 million of their value in the six months ended Sept 30, compared with a decline of GBP1.76 billion a year earlier, according to the first-half results published today.

Land Securities is “just beginning to think” about reviving a plan to build a tower known as the Walkie Talkie in the City of London financial district, Salway said. The project was put on hold 18 months ago.

British Land Co., the UK’s largest REIT by assets, aims to invest about GBP1 billion over the next two years, the company said yesterday. Chief Executive Officer Chris Grigg said there had been a “rapid and positive shift” in investor attitude to commercial real estate. -- Bloomberg