Profitable British Land enjoys retail's busy return

By

Nigel TAYLOR

Published
Nov 17, 2021

British Land is back in the black. The UK commercial property giant returned to profit for its half-year to 30 September, mirroring the performance of its peer Landsec and showing the sector is on its way back to normality after a tough pandemic-driven 18 months.

The group, which operates, the Meadowhall shopping centre in Sheffield and the new Broadgate development in London, said Wednesday post-tax profit came in at £370 million for the six months from a loss of £730 million a year earlier.

British Land also cited improved rent collection and higher value of its properties, up 2.9%, and in its case, a strong performance at its retail park focus.

CEO Simon Carter said: "We have delivered good financial and operational performance. Strong leasing activity, significantly improved rent collection and increasing values across our Campuses and Retail Parks have driven 6.1% total returns in the half.”

He said the half also saw strong rent collection, standing at 96% for the period, “close to pre-pandemic levels in retail”.

He added: “We are already seeing the benefits of our decision to focus on the value play in retail parks and urban logistics development in London.  We expect the value opportunity in retail parks to continue with rents stabilising and yields moving in. 

He also noted the business made good progress recycling capital from mature assets into its 1.6m sq ft development programme and £501 million of acquisitions. 

Importantly, footfall and sales in its Retail portfolio were 89% and 98% (97% and 98% for Retail Parks) of pre-pandemic levels respectively.

In the half, the company acquired £189 million of retail assets “with urban logistics potential”, including Heritage House, Enfield, Finsbury Square car park and Thurrock Retail Park, with total gross development value of its urban logistics pipeline also amounting to £600 million.

It also acquired £210 million of other retail parks, including Blackwater Shopping Park in Farnborough and the remaining interest in HUT, “targeting the value opportunity in retail parks”.

In Retail & Fulfilment, British Land said it also delivered more than 1 million sq ft of leasing activity, including 632,000 sq ft of long-term deals. 

“Encouragingly, we are letting ahead of ERV on Retail Parks (+1.8%) while on Shopping Centres, deals were 2.7% below ERV", it also noted. 

Carter added: “We expect the value play opportunity in retail parks to continue, driven by reducing yields and rent stabilisation including some rental growth for small, well located parks.  

“In Shopping Centres, valuation decline has slowed, and we expect to see continued yield stabilisation with the rate of ERV decline also slowing.”