The real estate industry appears to be recovering from the worst of the Covid-19 crisis, with some of the biggest companies once again turning a profit, agencies bullish across most business lines and occupiers eager to take space.

Earnings reports from several REITs this week showed a significant turnaround in their fortunes. At British Land, half-year profit of £370m marked the first time the company was in the black in its interim results for four years – and its largest half-year profit since 2015.

Landsec too recovered from its loss of a year ago, posting an interim profit of £275m, its first in three years and largest since 2015.

For both companies – which alongside SEGRO are the only REITs in the FTSE 100 – the half-year results are a welcome sign of stability following three consecutive annual losses in the case of British Land and four at Landsec. They will also reassure investors that the relatively new chief executives at both – British Land’s Simon Carter and Landsec’s Mark Allan – have put in place the right strategies to turn around their businesses after some rocky years.

At Landsec, that strategy initially involved a raft of disposals, but has now shifted to acquisitions, chief among which are the planned takeover of developer U+I and the purchase of a major stake in the MediaCityUK development in Salford, Greater Manchester.

“We now have a healthy pipeline of potential opportunities across each area of our business, and this is affording us excellent visibility of the potential returns achievable in each area together with the associated risks,” Allan said.

British Land’s Carter said trends in the market “reinforce the conviction we have in our strategy” to focus on campuses such as Broadgate in the City of London.

“This has actually been our biggest six-month leasing period in London offices in the past 10 years,” he said. “It feels as though there is a real pull towards the best spaces, and our campus offer is well positioned to take advantage of that.”

The REIT has secured prelets with Allen & Overy, JLL and Facebook, and now has some 330,000 sq ft of office space under offer across its campuses.

Back in the black

Results from several smaller real estate players painted a similar picture to that of the big REITs.

Palace Capital was back in the black, a pretax profit of £8m for the six months to 30 September comparing to a loss of £7.2m a year ago. Chief executive Neil Sinclair hailed a rebound in occupier activity in the office market, pointing to a level of competition for space in the company’s portfolio that had all but dried up during the pandemic.

At AEW UK REIT, a jump in values helped lift profit from £5.7m a year ago to more than £23m, with chairman Mark Burton welcoming growing signs of a “post-Covid-19 rebound in the second half of 2021” and highlighting the company’s eagerness to put money to work with fresh acquisitions.

And McKay Securities, which owns offices and industrial properties across the South East of England, noted the “re-emergence” of the regional office market and a marked return of workers to the traditional workplace after months of enforced working from home.

Flex operators too have been given a boost. Workspace Group this week revealed the £45m acquisition of a new site in Islington, N7 – a bus factory turned business centre that it will look to reposition – as it swung to a £3.4m interim profit. Chief executive Graham Clemett said: “Those who predicted that the pandemic would lead to the end of the office are being quickly disproven.”

Better than expected

Real estate companies’ latest gains follow a strong earnings season for the big agencies, many of which posted third-quarter results in recent weeks that showed business lines recovering from 2020 and in some cases even surpassing their pre-Covid performance.

With Cushman & Wakefield claiming that central London leasing figures are now up by 12% on the five-year quarterly average, agents are hailing signals that corporate occupiers are finally recommitting to the office as the favoured place to work.

In a trading update earlier this month, Savills said that the strength of the UK’s prime residential market and “better than anticipated” improvements in the commercial transactions markets meant that 2021 as a whole would “materially exceed” the agency’s expectations and its performance from 2019 – although it added that the outlook is “subject to the impact of further Covid-related lockdowns”.

The company’s peers and clients will hope that scenario remains hypothetical.