Landsec ‘optimistic’ about Mayfield in face of development challenges

Mindful of ongoing sector volatility, the listed real estate giant said work wouldn’t start on the scheme’s 900-home project until 2028 at the earliest, but that construction of the second office at the Manchester mixed-use project could begin next year.

Reporting its half-year results, Landsec remained cautious about new-build development and bullish about retail.

Results for the six months ending 30 September showed profits remained stable at £192m, with no change year-on-year. Rents across Landsec’s retail portfolio, which includes Newcastle’s Metrocentre, Liverpool ONE, Trinity in Leeds, and Bluewater in Dartford, were up 6.3%.

Occupiers in Landsec-owned shopping centres are also enjoying faster sales growth than retailers elsewhere. Since March, 22% of Landsec’s tenants have seen sales increase by 26%, compared with a national average of 2%.

While high-quality retail complexes remain Landsec’s highest-conviction call, the company has reduced development projects to less than 2% of its portfolio, citing high interest rates, the Building Safety Act, and construction cost inflation.

In terms of residential, Landsec said that “longer-term characteristics remain attractive given the persistent demand-supply imbalance”, but that the current economic landscape means schemes don’t stack up.

In October, Landsec put plans for 1,700 homes in Lewisham on indefinite pause, in line with efforts to limit exposure to development over the last few years.

“Irrespective of sectors, we are mindful of the negative impact on our risk profile of having large amounts of capital tied up in development for prolonged periods,” Landsec said in its half-year financial report.

Landsec’s Mayfield resi will not start until 2028 at the earliest. Credit: Assembly Studios

Despite this approach, chief executive Mark Allan said he remained “optimistic” about getting on site with the first 900 homes at Mayfield, a project that is “at or very close to” the company’s viability target.

“We are continuing to invest the time to take the project forward in the hope we can get to the right level of returns to commit [to it],” he said.

Landsec owns 50% of the Mayfield Partnership and is already on site with The Republic, a huge 243,000 sq ft office that represents a £155m investment.

While Landsec is eschewing new-build offices in general, Allan told Place North West that The Poulton, the 104,000 sq ft second office at Mayfield, could be on site next year.

The scheme is backed by £13m from the GMCA’s Good Growth Fund.

At MediaCity, which Landsec took full control of two years ago, there are no plans for new development at the moment.

The Salford campus, which is already home to 1.4m sq ft of offices and more than 1,100 homes, has consent for 3,200 more residences and an additional 800,000 sq ft of commercial space in phase two of the masterplan.

“I am certainly very optimistic about the prospects of MediaCity as a place,” he said, adding that the performance of the studios business and rental growth within existing offices “ought to be able to underpin development potential longer term”.

However, the approved phase two plans are subject to change, and the final make-up of the scheme will depend on the ongoing performance of the existing estate over the next 12 to 18 months, Allan said.

“Our focus for the Greater Manchester area over the next couple of years from a residential point of view is 100% Mayfield.”