16th Nov 2016 07:29
LONDON (Alliance News) - British Land Co PLC on Wednesday noted caution amongst occupiers in its Office unit, as it reported a swing to loss in its first half.
The FTSE 100-listed commercial property investor said there have been "differing dynamics" in its markets since the UK's European Union referendum vote, with leasing momentum maintained in its Retail unit, but a weaker trading environment for Office.
British Land, however, said "at this time of more cautious occupier demand in the London office market, we have benefited from having only a small amount of space to let", and it said it completed 68,000 square feet of Offices lettings in the half-year ended September 30.
In Retail, British Land said the Brexit vote was yet to have any "discernible impact" on occupier demand and letting activity, though the group said it had been a challenging period for some parts of the retail market. These included fashion and department stores, where sales were weaker, partly due to unseasonal weather.
British Land noted transactional evidence in the period since the referendum which has indicated some softening in investor demand for UK property and modest pricing adjustments, reflected in yields for the IPD benchmark moving out 13 basis points in the three months to September.
British Land said its portfolio registered a valuation fall of 2.8% since the end of March, underperforming the IPD benchmark, which fell -2.1% over the period and where the valuation reduction was moderated by stronger performance from industrials, a sector that British Land does not invest in.
The group's total accounting return for the first half was negative 1.5%, having been positive 9.1% for the same period the prior year.
British Land generated revenue of GBP297.0 million for the period ended September 30, slightly down from the GBP308.0 million reported for the same period the prior year.
However, the valuation deficit of GBP257.0 million for the year, from a surplus of GBP397.0 million the prior year, meant it swung to a pretax loss of GBP205.0 million. A year earlier, the group recorded a pretax profit of GBP823.0 million.
British Land proposed an interim dividend of 14.60 pence per share, up from 14.18p per share the prior year.
"The drivers of performance in our sectors are likely to differ in the coming years," British Land said.
"For Retail, performance will be driven by the overall economic performance of the UK and in particular how this translates to real wage growth and consumer spend. In Offices, demand for space in Central London is more likely to be impacted by policy and regulatory changes arising from the UK's departure from the EU, such as migration controls and passporting," the company added.
British Land also noted that uncertainty in the occupier market may "be reflected in lower investment volumes, although the continuing gap between property yields and interest rates suggest that UK property will continue to appeal to certain investor groups".
By Hannah Boland; [email protected]; @Hannaheboland
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