The firm confirmed this morning that it had sanctioned full building go-ahead on its Timber Square office build in SE1 and the refurbishment of the 1960s Portland House office block in SW1, which have a combined total development cost of £780m.
Last year Landsec gave Erith the go-ahead to progress enabling works, but had put main works on pause amid the economic uncertainty.
Mace is now understood to be lined up to take the Timber Square project forward after preferred contractor Laing O’Rourke dropped out last year, while McLaren Construction is understood to be in for the Portland House office block upgrade in Victoria.
Mark Allan, chief executive of Landsec, confirmed the decision saying that the developer was now forecasting a shortage of Cat A office in 2025, giving it the confidence to press the schemes despite industry-wide cost inflation raising original building cost estimates.
He said: “Last autumn, we decided to commit to the early works for the refurbishment of Portland House, SW1 and Timber Square, SE1.
“At a cost of £55m, this allowed us to maintain our programme for a delivery in late 2025, whilst keeping flexibility on the residual around £400m of capex at a time of high financial and political uncertainty.
“Returns on both projects remain attractive, with gross yields on cost of 7.4% and a yield on capex of 12%+, so supported by the strong leasing success in our current pipeline, with recent lettings 11% ahead of estimate rental value, we therefore plan to commit to the full works on both imminently.
He added: “We also continue to progress our future pipeline, as we received planning consent for Red Lion Court, SE1 in March.
“We are currently seeking to enhance our existing consent at Liberty of Southwark, SE1 and unlocked a future opportunity at Southwark Bridge Road, SE1 adjacent to The Forge, through a lease surrender we agreed in the second half of the year.
“This further adds to the potential to create a unique cluster of highly sustainable offices in Southwark, which is one of the most attractive areas of London in terms of amenities. All combined, this provides us with a 2m sq ft future pipeline, of which 1.1m sq ft is now consented. “