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LONDON-Land Securities saw 9% wiped off the value of its central London offices last year but management remained positive about the company’s ability to withstand a sustained downturn in the market.

Britain’s biggest quoted property company has 40% of its portfolio in central London, 19% of which is in West End. But the biggest hit in values was felt in the city where office values fell by 16.1%. Despite the scale of the exposure to the downturn in the London office market, chairman Ian Henderson remained optimistic. He said: “We expect competition for space in the West End coming back during 2004, earlier than the City. Our spread of assets in both should shelter us better than speculative developers.”

Pre-tax profits fell 12% to £320 million ($525 million) from £364 million ($597.2 million) but the dividend was up 1.5p to 35.5p and net asset value increased 5.2% to 1215p per share. Shopping centre and retail warehouse values rose 7.1% and 9.4% respectively.

The group reported a £46 million ($75.5 million) deficit in the value of properties under development for the year to 31 March. Henderson said: “The downturn in the central London office market, particularly in the City, has adversely affected the performance of this part of the investment portfolio and our ambition to generate returns from development may, therefore, be delayed.” However, he added development was progressing well, with 877,287 sq ft completed this year and a further 2.7m sq ft under development.

Land Sec said LST, formerly Trillium, was in discussions over new outsourcing contracts over 24.8m sq ft (2.3m sq m) of property, in addition to 800,000 sq ft (74,320 sq m) for the Department for Work & Pensions.

Chairman Peter Birch said: “In our view, retail currently offers greater potential for total returns than offices in the short term.For Land Securities Trillium, market conditions are more attractive, as corporations continue to seek operational efficiencies and ways to release capital for investment in their core activities, both of which can be achieved through total property outsourcing.”

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