British Land’s portfolio and net asset value have been hit once again by retail market turbulence but its mixed-use campus strategy offered some relief.
The REIT’s EPRA NAV declined by 5.4% to £8.56 per share in the six months to September 2019, down from £9.05 in March.
The firm’s portfolio value dropped by 4.3% from £12.3bn to £11.7bn. This was driven by another tumble in retail, which fell by 10.7% to £4.7bn.
British Land plans to reduce the retail element of its portfolio from 41% to 30-35% over the medium term.
The only segment to make any serious gains was Canada Water, SE16, which rose by 12.4% to £347m. The value of the firm’s offices portfolio rose by 0.4% to £6.4bn, while residential fell by 2.1% to £147m.
British Land also posted a loss of £404m during the period as rents fell by £24m to £267m.
Chief executive Chris Grigg said: “Looking forward, we expect our markets to remain uneven, but we have kept debt levels low, our balance sheet is strong and flexible, and we have a broad spread of expertise across our business. We expect retail to remain challenging, so we will focus on driving operational performance and maintaining occupancy. We see early signs that some liquidity may be returning to parts of the market, and our focus will remain on thoughtfully progressing our strategy to reduce exposure.”
He added in his review of the results: “The retail market remained tough, and we saw this reflected in valuations which were down 10.7%. However, our portfolio delivered positive like-for-like retailer sales with footfall flat, compared to a market where both metrics were negative.”
Market trends
Grigg said that “shorter-term deals” were often an “effective way” to secure a new occupier for space which has become vacant unexpectedly through a CVA or administration. “More generally, this trend towards more flexible leasing is reflective of the broader market as occupiers seek seasonal or pop-up sites in different locations on a shorter term basis.”
More than two-thirds of the British Land stores closed since April 2017 are either re-let, under offer or in negotiations.
In contrast, Grigg pointed towards Canada Water, which saw its valuation rise after Southwark Council’s planning committee unanimously supported its masterplan. The firm is now working towards the drawdown of the headlease, which it expects will happen in spring 2020, meaning the earliest possible start on site would be the middle of next year.
Going forward, the British Land expects the London property market to continue to support its campus approach.
Grigg said: “In London, we expect the market to remain good, with supply relatively constrained and high quality space, in well-connected, vibrant parts of town continuing to attract demand from a range of businesses. These dynamics are highly supportive of our campus approach.”
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