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Will retail stymie office landlords' recovery?

Shares in British Land, Landsec and Great Portland Estates have substantially rerated since news of vaccine success in November
Will retail stymie office landlords' recovery?
  • Higher retail and hospitality exposure is expected to weigh on earnings and asset values for some major London office landlords this year and in 2022
  • Yet some shares are now valued almost in line with rivals that earn a much lower proportion of rental income via these struggling industries

London’s major office landlords are fighting battles on two fronts. The spectre of a permanent shift towards flexible working by employers has cast doubt over future demand for workspace and threatens to weaken rents. Meanwhile, exposure to the troubled retail sector has already sapped rental income and pulled down the overall value of those portfolios. 

Of the London-listed stalwarts, British Land (BLND), Landsec (LAND) and Great Portland Estates (GPOR) are the most vulnerable to the accelerating structural decline of in-store retail. For Great Portland and British Land, retail accounted for around a quarter and almost a third, respectively, of portfolio value at the end of September. The weighting towards retail and hospitality rises to around 36 per cent for Landsec’s portfolio. 

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