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Landsec has said it will only make a limited start on a delayed 拢400m office-led scheme in Southwark which Laing O鈥橰ourke won two years ago because of worries over rising finance costs.

Designed by Bennetts Associates, Timber Square was given the green light by local planners at the end of 2020 and involves turning a 1950s printworks into 350,000 sq ft of grade A offices, affordable workspace, roof terraces and new public realm.

But the covid-19 pandemic and, more recently, the faltering economy and rising borrowing costs have put question marks over the job.

Another delayed Landsec scheme, to refurbish a 1960s office block called Portland House in London鈥檚 Victoria under a new 拢380m plan drawn up by Buckley Gray Yeoman, is also only due to make a limited start next year as well.

In its half year results this morning, Landsec said it would spend a 鈥渕odest鈥� 拢55m on early works for the pair marking an 鈥渋nitial commitment [and so] keeping flexibility on the residual c. 拢400m capex [capital expenditure] until mid-next year while markets remain unsettled鈥�.

It added the staggered start 鈥渨ill allow us to maintain programme for delivery in what we expect to be a very supply-constrained market in 2025, whilst buying an extra 6-9 months of time before we have to commit to a full development鈥�.

Explaining its decision further, chief executive Mark Allan said: 鈥淲e expect valuation yields to continue to see upward pressure from rising funding costs, especially for those sectors where they are lowest. For us, this principally affects London offices.鈥�

O鈥橰ourke, which beat Mace to the job, has signed a pre-construction services agreement with the firm saying much of the scheme at 25 Lavington Street, close to the Tate Modern, will be manufactured offsite at its Explore factory in the East Midlands.

Others working on the development, which was initially expected to finish March 2024, include QS Alinea.

Meanwhile, Landsec said it had 鈥渟ignificantly derisked鈥� its development pipeline with the 拢809m sale of 21 Moorfields, being built by Sir Robert McAlpine, to Lendlease in September. The job was supposed to finish in March this year but now won鈥檛 be completed until next March.

The developer said it racked up a pre-tax loss of 拢192m in the six months to September compared to a 拢275m profit last time. It blamed the fall on a near 10% drop in the value of its 拢2bn City of London office portfolio.