UK - Land Securities is retaining a "cautious outlook" of the property markets after registering an increase in empty properties within its portfolio, and fears property will continue on a downward spiral over the coming months.

Details of its third quarter interim management statement revealed following further deterioration in the markets over the last quarter, Land Securities officials are planning to focus on strengthening its balance sheet and on leasing its developments to help the company cope with the economic crisis.

Francis Salway, group chief executive of Land Securities, said: "Commercial property has gone through an unprecedented period of readjustment. The speed of valuation decline allied to rising insolvency rates means the sector is facing one of the most challenging periods in generations. However, the ongoing stability of the vast majority of our income streams acts as a major support.

"Our objective continues to be to navigate a prudent line through the current volatilities by concentrating on the management of our balance sheet and the leasing of our developments," he added.

Since 30 September 2008, Land Securities recorded 4.6% ‘voids' - properties without tenants - on like-for-like portfolios and warned leasing in the current climate would be a difficult challenge.

The void level in Land Securities' retail portfolio was 4.7% at 21 December 2008, up from 4.3% at 30 September 2008.  Tenants in administration represented 4.8% of annual rental income at 31 December 2008 compared to 2.9% at 30 September 2008.

Land Securities has also completed 14 retail development lettings to generate a total rent of £1.7m (€1.8m) and in the nine months to the end of last year, the firm's completed development lettings in the retail portfolio were £8.6m.

During the third quarter, the firm made further progress in leasing its Elements development in Livingston - now 78% let - however the letting process for Cardiff's St David's 2 retail development, due to be completed in September 2009, is proving more difficult and is only 23% let, according to the firm.

Leasing in Land Securities like-for-like office properties in the London portfolio remained stayed the same as the last quarter, at 4.4%. The like-for-like void rate including development pipeline projects also stayed the same, at 9%.

The firm warned the biggest risk at the moment to income is expiring leases may not be renewed. Lease expiries in the London portfolio due in the final quarter of the firm's financial year represent 1.7% of rental income.

During the third quarter of last year, Land Securities sold Trillium for £750m and £213.8m other assets, including property disposals of £201.8m, to pay off debt.

As of December 2008, net borrowings totalled £5.69bn, down from £6.08bn at 31 September 2008. They had an average cost of 5% and maturity of 11.1 years, of which 87% of the debt was fixed rate.

The firm and its joint ventures have also secured £93.4m of new debt facilities since September last year. The earliest bank facility to mature will be in 31 March 2010.

The third quarterly dividend payment for the current financial year, starting 1 April 2008, will be a property income distribution of 16.5 pence per share and will be paid to shareholders on 24 April 2009.

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