Retail aids British Land turnaround
Published: 18 May, 2010
The rebound in commercial property valuations helped stem losses at British Land in the year to 31 March 2010, and the company is cautiously optimistic about the retail sector for this year.
British Land, manager of Meadowhall in Sheffield and the Hercules out-of-town portfolio, staged a turnaround after record losses last year. A pre-tax loss of almost £4bn was turned into a profit of £1.128bn; although the underlying profit before tax was down marginally. Net asset value per share rose 27 per cent to 504p from 398p.
The bounceback reflects the rebound in capital values and an improving occupier market. Retail warehouses account for 31.4 per cent of the portfolio and valuations rose by 14.8 per cent in the year and 7.7 per cent in the fourth quarter. The valuation uplift was driven by an inward shift in initial yields of 122 bps.
And in shopping centres, accounting for 13.9 per cent of the portfolio, initial yields shifted inwards by 15 bps, with the valuation rising by 3.2 per cent for the year. But ERVs fell by 5.7 per cent.
Retail occupancy rose to 99 per cent from 98 per cent a year ago, helped by successful lettings in the fourth quarter. New lettings in the quarter were ahead of most recent rental values with 37 long term deals 7.1 per cent ahead of ERV. Occupiers in administration have reduced from 2.2 per cent to 0.6 per cent since March 2009.
Chris Grigg, chief executive, said: “In retail, we believe there will continue to be robust retailer demand for modern space in prime locations and we expect to see wide differences in performances between the best locations and less well located secondary assets.”
But he warned: “There is a real risk of further rental deflation particularly given the level of lease expiries across the retail sector in 2010/11. However, we feel well placed with our high quality portfolio which is focused on those sectors of the retail industry which are expected to remain relatively resilient.”
