Top London landlord says return to the office is gathering pace

Almost a fifth more London workers turned up to the office over the past year, according to one of the capital’s largest landlords, as employers’ efforts to get staff back show further signs of paying off.

Land Securities, which owns £4.3bn worth of central London offices, mostly around Victoria and the City, said the average number of workers entering its buildings was up 18 per cent over the year to March, based on tracking unique visitors passing through their turnstiles.

The figures are a boost to London office landlords that have suffered from uncertainty over demand following the Covid-19 pandemic and big hits to property prices driven by rising interest rates.

Mark Allan, chief executive, said offices were still getting busier. “We continue to see steady growth. This isn’t really slowing up at the moment.”

But he added that the return to work depended on the location and quality of office facilities. “We have consistently said that we felt that large HQ space and areas which lack the amenities to make people want to spend time there are most at risk as a result of more flexible ways of working,” he said.

Tuesdays, Wednesdays and Thursdays were by far the busiest days in its offices, but the trend of increasing attendance was consistent across all five days of the working week.

Analysis of Tube ridership data by the Centre for Cities earlier this year found that the number of people arriving at Bank and Moorgate stations in the City was about 90 per cent of pre-pandemic levels on Tuesday to Thursday, about 70 per cent on Monday and 50 per cent on Friday.

Landsec has sold £2.2bn of offices since 2020, including reducing its portfolio in the City to focus on “the lively, well-connected west end and Southbank markets”.

The split in the office market showed up in Landsec’s portfolio, with City office prices plunging nearly 14 per cent in the year to March while West End offices only fell 3.6 per cent.

The company said strong office and retail demand helped offset the effect of rising interest rates on its property values. Its roughly £10bn portfolio — which includes offices, shopping centres and trophies such as the famous Piccadilly Lights — dropped in value by £625mn, or 6 per cent, in the year to March. The decline was less severe than the 7.7 per cent drop the year before.

Allan said prices were starting to turn the corner after two years of heavy declines. “Absent any further macro shocks, we think the value of high-quality assets has largely bottomed out and will start to grow in the foreseeable future as rents rise,” he said, adding that 60 per cent of the company’s portfolio had stable prices in the six months to March.

The FTSE 100 landlord reported that rents were 8 per cent higher on renewals and reletting, and there was a 2.8 per cent increase in like-for-like net rental income.