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Turmoil on the UK high street has cut almost £600m from the value of British Land’s retail property portfolio in six months.
The value of the property company’s shopping centres, retail parks and stores dropped 10.7 per cent, or £599m, to £4.8bn in the half-year to September, after an 11.1 per cent drop in the previous six months.
As a result of this latest decline, British Land reported a pre-tax loss of £440m, compared with a £42m loss in the same period a year earlier.
Chris Grigg, chief executive, said: “It is tough conditions for retailers of all stripes, not just bricks-and-mortar retailers. Despite full employment, we have relatively low consumer confidence and big structural pressures on the retailers . . . We expect conditions to remain tough.”
The overall value of British Land’s portfolio fell 4.3 per cent to £11.7bn. A rise in the value of the company’s development site at Canada Water, where it recently gained planning permission for a large mixed-use scheme, partly compensated for the retail problems.
However, shares in the group dropped 1.7 per cent in early trading to 565.4p, while analysts said British Land, like some other property groups, had been slow to recognise the scale of changes in retail.
“While we are attracted to British Land’s relatively higher development pipeline than peer Land Securities, its tardy repositioning of its retail portfolio has resulted in a period of weaker relative performance,” said analysts at Liberum.
Higher costs, weak consumer confidence and the shift towards online shopping have pushed a series of retailers into insolvency over the past two years. Most recently, retailer Mothercare entered administration in the UK this month.
British Land, which owns properties including Sheffield’s Meadowhall shopping centre, is seeking to dispose of large chunks of its retail portfolio. It sold £236m of retail properties during the six months, but that included the sale of a portfolio of J Sainsbury supermarkets, a sector that has been spared much of the recent pain, for £194m.
It said it had re-let, or was in talks to re-let, two-thirds of stores made vacant by retailer insolvencies since April 2017. Overall new retail leasing deals were coming in 1 per cent ahead of passing rent, British Land said.
But the group added that it had also been using short-term leases to fill space that had become vacant unexpectedly when a retailer collapsed
British Land’s larger rival Land Securities also recorded value drops this week: its portfolio recorded a £368m, or 2.8 per cent, decline, largely because of its retail holdings.
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