British Land bullish on London office and retail outlook

18th Nov 2014 07:09

As its increased development investment in London pays back in spades, British Land grew its total portfolio valuation increase 7.2% and net asset value by 11% in the first half, with improving demand for office space in the capital and restricted supply lifting prices.The office and residential business saw 8.7% uplift in portfolio valuation, with the larger retail business, which accounts for 54% of the portfolio, seeing encouraging indicators about growth in consumer spending and rental growth as it saw an uplift of 6.6%.The FTSE 100 real estate investment trust (REIT) declared a quarterly dividend of 6.92p, bringing the half year to 13.84p, a 2.5% rise on last year's.This was on the back of a 6.2% increase in underlying pre-tax profit to £155m, with its statutory profits more than doubling to £1.04bn.Development projects generated around £1bn of profits from the current development cycle, "with more to go", after the 'Cheesegrater' Leadenhall Building was completed and nearly 60% let/under offer, including some of the highest ever rents seen in the City.Management said the business was well positioned to move ahead with its near-term pipeline, expecting to commit to the expansion of the Paddington Central project with investment in 4 Kingdom Street and planning permission to be submitted for Blossom Street in Shoreditch in the next few months.Since the start of the financial year, the office and residential arm has completed or placed under offer 695,000 square feet of lettings and renewals, with occupancy up 600 basis points to 95%.In retail, signed 606,000 sq ft of lettings and renewals in the half with investment lettings and renewals on average signed 8.4% ahead of ERV, rent reviews 3.1% above previous passing rent and ERV growth across the portfolio was 1.1%."The combination of physical and online retailing is proving increasingly complementary, allowing consumers to shop in a way that suits them," the company said."Today, the physical store is central to the majority of consumer journeys, but shoppers have much higher expectations of their whole shopping experience. We are successfully evolving our portfolio to ensure it meets the needs of our occupiers and their consumers and this is reflected in our strong lettings performance and improved operational metrics." Chief executive Chris Grigg added a confident statement on outlook: "The economy is growing, interest rates are likely to stay low for some time and investor demand for quality properties in and outside London is strong."Demand for offices in London is improving, supply remains constrained and rental growth now looks firmly established. In retail, economic growth is feeding through to consumer spend and the lead indicators of rental growth in our business are all positive."