British Land shows recovery in property values

The value of British Land’s portfolio has recovered after slumping last year, indicating that confidence is beginning to return to the UK property market.

The property company, which is the second largest in the UK, said its net asset value per share, the preferred measure of performance used by property companies, had dipped 0.4pc to 915p in the last year, far less than the up to 6pc fall expected by some analysts.

The smaller-than-expected fall indicates that valuers think demand for buying UK commercial property has returned, having slumped after the EU referendum in June. The values particularly rebounded in the last six months.

British Land’s figures were also helped by the record-breaking sale of London’s Cheesegrater skyscraper, which it offloaded to Chinese firm CC Land Holdings for £1.1bn.

British Land sold its stake in the Cheesegrater CREDIT: RAY TANG/REX

British Land’s profit before tax dropped dramatically from £1.33bn to just £195m in the 12 months to March 31, although underlying profits, which strip out changes in property valuation, rose 7pc to £390m. The firm’s full year dividend was 29.2p, 3pc higher than the previous year.

British Land owns both offices and retail properties, and has in the past been the subject of concern that it is over-exposed to the City of London.

While chief executive Chris Grigg acknowledged that uncertainty in the market will continue, he said was confident in the continued growth of the company.

“While the uncertainty will continue, people are getting on with their business and letting space,” he said.

Chris Grigg
Chris Grigg, chief executive of British Land CREDIT: CHRIS RATCLIFFE

The company is unlikely to build many office developments speculatively, that is without a tenant already agreed, he said. Instead, it was targeting deals with occupiers before starting building.

“Although some discussions have gone on longer than we might have expected, we do have space under offer and we have a lot of serious discussions going on,” he said.

The company’s retail division would be focussing on buying and developing shopping centres and retail parks, rather than one-off stores, Mr Grigg added.

British Land is poised to submit plans for a vast regeneration scheme in Canada Water, south east London, and Mr Grigg said there were a number of other developments in the pipeline.

It also has plans to launch a new flexible office space division to rival the likes of WeWork and Workspace, which offer short-term lets to companies on a casual basis.

However, analysts remained cautious about future demand for both office and retail space. David Brockton, analyst at Liberum, said: “We still anticipate softening in occupational demand for office and retail and this now appears to be emerging.”

Meanwhile, Nicholas Hyett, equity analyst at Hargreaves Lansdown, said that the reining in of speculative development and the sale of major assets showed British Land was “clearly uncomfortable about the future”, adding that the sales suggested the company “feels there could be stormy weather ahead”.

Shares in the company were down almost 3pc on Wednesday morning to 654p.