British Land suffers £1bn hit from retail tumult

Property company dented by coronavirus impact and boom in ecommerce

Upheaval in the retail sector, accelerated by coronavirus, has wiped more than £1bn off the value of British Land’s portfolio. 

The FTSE 100 property company owns about £11bn worth of property, including key sites in Broadgate, east London, and Paddington in west London. Just over a third of that — £3.9bn — is made up of retail parks, stores and shopping centres, which have shed more than a quarter of their value over the year.

Overall, British Land’s portfolio lost 10 per cent of its value in the year to March, with modest gains in offices and a jump in the valuation of a big development site in Canada Water being wiped out by the decline in retail.

The company announced on Wednesday that it had fallen to a loss of £1.1bn in the period, compared with a loss of £319m the year earlier.

Bricks and mortar stores have suffered from the growth of ecommerce and coronavirus, which forced them to close in late March.

“It’s not like retailers are having an easy time right now,” said Chris Grigg, British Land’s chief executive. Retailers on the company’s estate paid just 43 per cent of the rent they owed on the payment date for March and £35m of due rent has been deferred.

On the next payment deadline, in June, Mr Grigg said: “We don’t expect it to be any easier. We’ve had some retailers taking the view that they’re allowed to open. We’re about 15 per cent open in terms of retail, grinding up from [a low point of] 10-11 per cent.”

British Land received 97 per cent of rent due from office tenants on March 25. Shares in the company rose almost 8 per cent on Wednesday, partially offsetting a near-40 per cent slide in the share price since the start of the year.

“I think [investors] were pleasantly surprised by the performance of the office portfolio,” said Colm Lauder, real estate analyst at Goodbody. British Land’s office rent take was ahead of rivals such as Land Securities, Great Portland Estates and Derwent London.

But most desks have been vacant for the past two months and many businesses are reconsidering their office requirements.

Take-up of central London office space fell by two-thirds in April compared with last year, according to property company CBRE. In turn, peak rents in the city could decline from £75 per sq ft to £65, estimated Mike Prew, an analyst at Jefferies. Property values would be affected in turn.

The government’s guidance to retailers, released on Monday, was another reason for the boost in the company’s share price, said Mr Prew. 

But the move had also sown confusion, with some shopkeepers believing they could open immediately, said Mr Grigg. “We’re optimistic that the government will back up the direction of what they’ve said with some detail.”

British Land had been cutting back its retail exposure prior to the crisis, selling £236m worth of shop space in the six months to November. At the company’s half-year results, it said it would sell a further £1.3bn worth of retail space to trim its exposure to the sector. 

“There are still retail assets we would like to dispose of. But it’s difficult to put a timetable against that,” said Mr Grigg. Since the year end, the company had sold a further £140m worth of assets, he added.

The company had been due to announce its results on May 13, but pushed them back as a result of the virus.