British Land to tap into retailing trend

British Land, the UK’s second-biggest property company, will increase its focus on developing shops around the UK regions in a sign of confidence that under-fire retailers will continue to consolidate in bigger and better stores.

British Land reported a 12.5 per cent increase in full-year net asset value per share to 567p, driven by property value growth of 6.9 per cent on the back of a solid lettings performance.

Estimated rental values rose 0.7 per cent in its retail portfolio, which comprises 33m sq ft of retail warehousing, supermarkets and shopping centres, and by a more marked 7.7 per cent in its London offices.

Chris Grigg, chief executive, said that rising rents in its almost fully let £4.9bn ($7.9bn) portfolio justified the company’s bullish view that it had invested in the right areas that were underpinned by continuing occupier demand.

“People want to shop in the right locations …and retailers are going to go to the right areas, which means those that are regionally dominant. As rents improve, we will do more developments in future.”

British Land’s confidence comes in spite of gloomy consumer sentiment and a difficult time for retailers. The company, which has about two-thirds of its portfolio in the retail sector, has lined up a number of schemes for the next stage of development, including in Luton and Hampshire.

It is also in talks to build an Ikea store next to Meadowhall shopping centre in Sheffield, which it owns with London & Stamford.

The company has previously been focused more on its London development business, where it is rolling out a £1.1bn programme to build 2.2m sq ft of offices by 2014 that will increase the weighting of offices in its portfolio.

Last week it signed a rental agreement with Aon to lease about a third of the Leadenhall Building, while it has also let a building to UBS at Broadgate that is at the centre of a row over a potential listing.

Mr Grigg said there would be more opportunities to buy in future, having made about £511m of acquisitions last year. He said that the company would consider expanding its residential and overseas property exposure if it found the right deals.

For the 12 months to March 31, pre-tax profit fell from £1.13bn to £830m, while underlying profit, which strips out the revaluation of its portfolio, rose from £249m to £256m.

Diluted earnings per share fell from 132.6p to 95.2 and the total dividend is held at 26p.

The shares, which have risen almost a third over the past year, fell 16½p to 576p.