Land Securities, Britain’s biggest property developer, has indicated its fresh confidence in the market by setting aside £200 million for two big developments in London next year. It is the biggest commitment to speculative projects on such a scale — without bank borrowing — since the start of the downturn.

The company demolished Park House, a Sixties’ tower block on Oxford Street, a year ago but work on the 316,000 sq ft site stopped because of the downturn and amid planning complications. The other development will be at Selborne House in Victoria.

Francis Salway, the chief executive, said that the group did not need to borrow to start work on the sites. “Values are now coming back, we are comfortable with our capacity to invest and we will be developing speculatively,” he said.

Speculative development almost ground to a halt last year, with developers unable to obtain bank loans needed to complete their work. The recent pick-up in demand from investors in commercial property in London has given developers renewed confidence, although banks remain reluctant to lend on speculative projects. Michael Marx, chief executive of Development Securities, the developer, said: “I am not aware of any other project of this scale since the downturn began. The tight nature of the market and the prime position of the sites could be behind the decision.”

Although demand from tenants for shops and offices is still lower than normal, there are signs that it is recovering. Mr Salway believes that the two buildings, which have not been pre-let, will be among the first to be completed in time for an anticipated upturn in the economy and stronger demand from businesses for commercial space.

Both schemes are mixed use — a combination of shops, offices and flats. Park House will be the biggest development on Oxford Street for more than 40 years. Selborne House has not yet been demolished.

Land Securities said in July that it was planning to start work on the sites next year, but this is the first time that it has given an estimate of the total cost or said that it will not need bank finance to start the schemes.

The company, which has not started a development since 2006, raised £756 million through a rights issue this year, partly to fund new projects. Last month it announced plans to reduce debt by £1.5 billion, bringing the loan-to-value on its portfolio down to 59 per cent, from 66 per cent at present. It sold a 33 per cent stake in the Bullring shopping centre in Birmingham to Australia Future Fund for £210 million in September and has net gearing of 93 per cent of its portfolio value.

Work is continuing on other high-profile mixed-use developments that began before commercial property values began to sink in late 2007. The “Shard of Glass”, an ambitious project near London Bridge by Irvine Sellar and his son, James, of the Sellar Property Group, is in the first phase of development. Heron Tower, a 46-storey development in the City by Heron International, is now up to the 38th floor and due for completion in 2011.

Some estate agents believe that there will be no market for solo office blocks in future. One said: “The days of building a solo office block are long gone. Mixed use, residential and commercial, is the way forward for property development.”

Mr Marx said: “The office element is the most challenging to let. The fall in rents has been severe and there are no tenants around. Retail units may be easier to pre-let and residential units will sell because of the hot market.”

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