Soaring rental rates and increasing demand for office and retail space have boosted profits at the property company British Land, but rising interest rates slashed almost £200m off the value of its portfolio.
British Land, which owns sites including the Broadgate Centre in the City of London and the Paddington Central development, reported a 3.4% rise in underlying profits to £142m in the half year to the end of September.
Investors, who received a 5% increase in its half-year dividend per share pay out to 12.16p, cheered the positive outlook for the company, whose share price has fallen by more than 40% over the past five years as the Covid pandemic hammered the commercial property market.
The company said occupancy rates across its portfolio exceeded 96%, with its retail parks at 99%, compared with the wider UK retail market vacancy rate of 13.9%. Vacancies across its business campuses was at 4.2% compared with 8% across the wider London office market.
Simon Carter, chief executive of British Land, said the company felt so strongly about the outlook for top quality office space in London that it had rejected an offer of an alternative tenant from Meta in favour of re-letting the space itself at a higher rental level.
The owner of Facebook paid £149m to break its lease on an eight floor building near Regent’s Park, which it never occupied, and offered British Land an alternative tenant to take over the lease, which it signed in 2021.
“This is British Land taking the building back,” said Carter. “Market rents are now much higher than the rent Meta was paying.”
British Land, which earlier this year was relegated from the UK’s blue-chip share index ending a 21-year run in the FTSE 100, said rental growth had accelerated and it now expects estimated rental value (ERV) to be at the