British Land highlighted strong retail park valuation growth and an inflection in campus valuations as it struck an optimistic tone in its financial results for the year to 31 March – despite predicting “broadly flat” earnings for the year to come.
The REIT’s portfolio values rose by 1.6%, with 1.5% of the growth coming in the second half of the year. Retail parks saw the sharpest growth at 7.1%, while retail and London urban logistics came in at 5%.
Based on its performance from the past year, Simon Carter, chief executive at British Land, said that retail parks would continue to play a greater role in the business.
“We’re a third retail parks today. I think that will continue to go up and you’ll probably see, within our office business, maybe a little less standing investments and a bit more on the development side,” Carter said.
While its campuses saw a decline of 0.8%, the company predicted the asset class a more positive trajectory after seeing an inflection in the second half of the year with 0.8% growth, which it attributed to its development pipeline.
Rental values grew across the board at 4.9%, again with retail parks in the lead with 6.0% growth, retail & urban logistics with 5.6% growth and campuses up by 4.3%.
The company leased 3.3m sq ft over the course of the year, 8.6% ahead of ERV with a further 0.9m sq ft under offer at 15% ahead of ERV.
A third of this space currently under offer at 9.2% ahead of ERV is in its campuses, where negotiations are also taking place for a further 1.7m sq ft.
Meanwhile, the rest of the space under office is in its retail and London urban logistics portfolio, where 1.8m sq ft transacted this year at 10.% ahead of ERV, with a further 0.6m sq ft under offer at 18.4% ahead of ERV.
The company predicted that earnings per share would remain broadly flat for the year, with annual earnings growth of 3-6% in subsequent years, including c.4 of underlying earnings per share from developments in FY27.
Carter expressed optimism about the outlook for the years to come. He said, in light of the balance sheet reductions reported due to disposals of assets, delivering a flat result this year was “ahead of consensus” and “a very good effort.
“We expect to do something similar next year. That’s our guidance at the beginning of the year. We like to be prudent… we’ll have the developments coming through in FY27. We’ve guided 3-6% earnings growth each year, but in FY27 we would expect to be at the upper end of that range.”
Net rents fell by £30m for the year, which the company attributed to the sale of its Meadowhall Shopping Centre joint venture in July 2024 for £360m to its joint venture partner Norges Bank Investment Management.
The company also notably sold half of its stake in the 750,000 sq ft 2 Finsbury Avenue, EC2, development to Modon Holdings and received cash proceeds of £100m while also retaining a 25% interest.
Over the course of the year it has recycled capital and acquired 15 retail parks across the UK for a total of £738m, as well as the remaining 12.5% interest in New Mersey Retail Park in Speke.
It has also invested £394m in its development pipeline and asset management initiaties in its standing portfolio.
Carter said he was pleased with the leasing performance, good cost control and asset management over the year.
“We have maintained our underlying earnings per share, despite significant development activity which will be a key driver of future earnings growth,” Carter said.
He added: “Return to the office is in full swing, with mid-week occupancy back to pre-pandemic levels, and value and multi-channel retailers are competing aggressively for space on our retail parks.”
Image from British Land
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