Property investment giant Landsec has announced plans to drastically scale back investment in office-led developments over the next five years and shift its focus to the residential sector.
In a capital markets update, the firm revealed it intends to cut funding for new office-focused projects by at least half after its current pipeline is completed, redirecting the freed-up resources into residential-led schemes where it believes returns will be just as attractive but carry lower risk.
To help finance this strategic move, the well-known commercial landlord aims to sell off around £2 billion in office-led assets. The trend echoes a broader shift within the property market, where many investors now view offices as having limited growth potential compared with the stable, inflation-linked returns that residential properties can provide.
Landsec’s plans include devoting more resources to three key developments in Lewisham, Manchester, and north London, each offering the capacity to build thousands of homes alongside shops and other uses on what are currently outdated retail or car park sites. The firm may also consider acquiring existing blocks of flats to achieve economies of scale more quickly, given that it currently owns only a small number of residential units.
This strategic evolution underscores a growing sentiment in the real estate industry that prime office assets may no longer yield the best returns. By contrast, the residential sector is positioned to offer steadier, more predictable income streams, a shift Landsec is clearly looking to capitalise on.
