British Land losses almost double despite booming rents

British Land saw losses almost double in the first half of the year, but the property developer expects full-year rental growth to be at the high end of its forecast range.

The property developer reported a loss of £61 million in the six months to September, compared to £32 million in the same period last year, as high interest rates continued to depress property values.

It blamed rising yields in the West End and City of London ‘campuses’ portfolio, and increased economic and political uncertainty for a 2.5 per cent decline in the portfolio’s value to £8.7 billion .

This offset a slight increase in the value of the retail park portfolio, which has benefited from rising occupancy rates since the pandemic as retailers have increasingly prioritized out-of-town and suburban locations.

However, the company’s estimated rental value increased by 3.2 percent thanks to low vacancy rates, a resilient UK economy and solid underlying fundamentals in the markets.

British Land expects full-year rental growth to be close to the high end of forecasts, with increases of 2 to 4 percent in the campus portfolio, 3 to 5 percent in the retail parks and 4 to 5 percent in the London portfolio. urban logistics operations.

Simon Carter, CEO, said these three segments have ‘the strongest occupational fundamentals and the highest rental growth within the office, retail and logistics sectors’.

The group’s optimistic view of its London office portfolio is in stark contrast to the pessimism in the commercial property sector, as an expansion of remote and hybrid working has reduced demand for office space.

At the end of September, a report from estate agent Jefferies warned that the capital’s office market was in a ‘rental recession’ as occupancy rates rose to their highest level in three decades.

Two days earlier, British Land announced that Facebook owner Meta had paid £149 million to terminate the lease on one of its developments, 1 Triton Square near Regent’s Park.

The company said that while Meta found an alternative tenant to occupy the property, it rejected it because rents have increased since the agreement was initially signed and it wants to add some additional laboratory space.

Founded in the 1850s, British Land is one of the largest landlords of commercial property in Britain, including Sheffield’s Meadowhall shopping center and the London-based Broadgate, Regent’s Place and Paddington Central ‘campuses’.

Sophie Lund-Yates, chief equity analyst at Hargreaves Lansdown, said: ‘British Land’s big bet comes in the form of its campuses, which rely on continued demand for high-quality hybrid office space.

‘Although the first indications are positive, the prospects are less clear. A return to more full-time office hours is still possible and would leave British Land exposed.

“On the other hand, British Land has best-in-class assets in both industrial and retail spaces. The question is not about the strength or strategy of management, but rather the shape of demand in these two difficult sectors.’

British Land Shares were 3.9 per cent higher at £3.26 by mid-Monday afternoon, although they are still down by around a fifth since the start of the year.