Landsec has unveiled plans to scale back its investment in new office-led developments over the next five years in a bid to pivot its focus to the residential market.
In a capital markets update, the business outlined plans to reduce capital allocated to new office-led development starts by at least half over the next two to five years, once it has completed its current pipeline.
Development capacity will be shifted to residential-led projects “where returns are expected to be similar, but risk is lower”.
Over the same period, Landsec aims to sell £2bn of office-led assets to fund its expansion in residential.
The strategic shift by one of Britain’s best known commercial landlords follows a wider trend in the industry. Investors increasingly see less potential to make big returns from high profile office buildings and are attracted to the steady inflation-linked income from sectors such as housing.
Landsec wants to devote resources to its three large residential projects located in Lewisham, Manchester and north London. Each has potential to build thousands of homes alongside retail and other uses on land previously developed for other uses, such as outdated shopping centres and car parks.
The company could also look to buy existing blocks of flats to quickly achieve economies of scale. It currently owns only a few hundred residential units.
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