British Land’s profit increased by 3.4% to £142m over the first half of the year, thanks to strong leasing and strict cost control.
The REIT leased 1.6m sq ft during the period, 12.2% ahead of ERV. A further 1.1m sq ft is under offer, 16.6% above ERV. The portfolio experienced rental growth of 3.2%, with retail parks leading the way at 4%.
British Land said it was expecting ERV growth at the top end of its previously guided ranges for the year, with campuses between 2% and 4%, retail parks between 3% and 5%, and London urban logistics leading between 4% and 5%.
Chief executive Simon Carter said: “We are benefitting from our decision to pursue a value-add strategy across campuses, retail parks and London urban logistics. These submarkets have the strongest occupational fundamentals and highest rental growth within the office, retail and logistics sectors.”
Values were down by an average of 2.5%, due to a 4% fall in its Campus portfolio. Values for retail parks rose by 0.2%, while London urban logistics was up by 0.6%.
The REIT reported that its EPRA cost ratio was 14.8%, down from 19.5% six months previously.
Carter said: “We are pleased with the performance in the first half, with underlying profits increasing 3% on the back of another strong period of leasing and good cost control. We have seen yields continue to move out, but as we predicted in May, at a slower pace.”
Yields rose by 23bps to an average of 6.1%. Campus yields were up 32bps to 5.3%, retail parks up 13bps to 6.7%, and London urban logistics up 9bps to 4.7%
Carter added: “Whilst in the past 18 months we have delivered good earnings growth, asset values have been impacted by the increase in interest rates. The geopolitical and economic landscape remains uncertain; however, with our portfolio yield now over 6% and an increased likelihood we are approaching the peak in UK base rates we expect the strong occupational fundamentals of our submarkets, together with the differentiated quality of our assets, to reassert themselves as the primary drivers of performance.”
The REIT said highlights for the six months included the sale of its Vodafone office and data centre portfolio for £125m, 13% above book value at a net initial yield of 4.6%, Meta’s surrender of its 1 Triton Square lease in September for £149m, and the acquisition of Thanet Retail Park in April 2023 for £55m at a NIY of 8.1%.
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