British Land – interest rates put pressure on value of retail assets
- British Land’s occupancy was 96% over the first half
- Retail parks continue to show more resilience than high streets
- Higher interest rates have pushed the portfolio valuation down a further 2.5% to £8.7bn
Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown: “Mega-landlord British Land has had a reasonable first half, buoyed by the continued resilience of retail parks. Customers are still preferring to shop in these locations, due to the convenience of parking and calibre of stores. In turn, retailers are investing heavily in these locations, which only makes the customer experience better and feeds into this being a long-term trend. It’s something that British Land’s grateful for as it’s had to navigate some fast-changing tides in the world of retail.
British Land’s big bet comes in the form of its campuses, which are relying on a continued demand for high quality hybrid office space. While early indications are positive, the outlook is less clear. A return to more full-time office hours is still possible and would leave British Land exposed. On the flipside, British Land does have best in-class assets, across corporate and retail spaces – the question isn’t about management strength or strategy, but rather the shape of demand in these two tricky sectors.
Interest rates have continued to dent the valuation of the portfolio, but the group remains positive that rates have peaked. Should that be true there will be space for a recovery, but the higher-for-longer narrative does clip potential in the medium term.”