"We are realistically cautious...the volume of capital and leasing market activity has certainly thinned," he said.

The company, which owns commercial properties worth more than 14 billion pounds, did not provide details of net asset value in the update but said it had completed 67.2 million pounds of property sales during the last three months at prices 0.2 percent below March 2008 valuations.

The amount of vacant space in its portfolio also increased marginally to 3.5 percent from 3.4 percent on a like-for-like basis.

Inflation blighted consumer spending in June but Salway said the company continued to see demand for good retail warehouses and shopping space at premium locations.

The company completed 34 new retail lettings during the period, boosting group annual rental income by 3.7 million pounds.

While occupier demand for offices in London’s West End business district remained solid, Salway said demand for space in the City of London financial district had weakened in the wake of the credit crunch, leading the company to focus energies on projects for delivery in 2010 and beyond.

DEMERGER

Land Securities said it continued to make progress on internal preparations for its planned demerger into three separate retail property, office and property outsourcing companies, although gave no news on timings.

"We have no timetable to follow but our own...we are prepared to be patient," Salway said, adding that the company continued to evaluate a number of trade sale offers for its outsourcing arm Trillium.

Although describing the process as "relatively advanced", Salway said no action would be taken before favourable market conditions returned.

"The economy is critical to timing (of a market recovery)," said Salway, when pressed for an estimate on possible sector revival.

"It is not uncommon for an investment market recovery to occur at a different time to one in occupational markets. That is why it is so difficult to identify a definitive time," he said.

(See www.reutersrealestate.com for the global service for real estate professionals from Reuters)

(Editing by Louise Ireland)