British Land Valuation Creeps Higher on Strong Rents and Retail
(Bloomberg) -- British Land Co. saw an increase in the value of its portfolio of offices, warehouses and stores in the first half, helped by deploying more capital into the strong-performing retail sector.
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The real estate investment trust reported a 0.2% rise in the value of its UK property holdings in the six months through September, according to a statement Wednesday. It leased 1.7 million square feet of space at rents 8% higher than expected.
“While geopolitical risk remains elevated and there has been some volatility around the recent budget and US election, British Land’s portfolio is well positioned for the inflection in the cycle,” Chief Executive Officer Simon Carter said in the statement.
Higher interest rates have weighed heavily on UK commercial real estate valuations over the past few years. However, the impact has been partially cushioned by rental growth, which has continued despite a sputtering economy thanks to a shortage of the best, most environmentally friendly space.
A rally in shares saw British Land’s stock reinstated to the UK’s top tier after being demoted to the FTSE 250 last year. In many European markets, there are signs that valuations are stabilizing or that the rates of decline are at least slowing.
British Land has repositioned its portfolio of stores to focus on retail parks, collections of stores centered around free parking that are increasingly popular with retailers as they seek to cut delivery and return costs. Since April, the company has deployed £711 million ($903 million) in retail parks, given “their attractive occupational fundamentals and high occupancy,” according to the statement.
Similarly, the super prime space it’s developing on its campuses is benefiting from “a significant imbalance between the demand and supply for new and substantially refurbished space,” British Land’s Carter said in the statement. That’s particularly prominent in the City, where the firm estimates a shortfall of 5 million square feet over the next four years.
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