British Land cautious after strong quarter for London offices
British Land today said it remained cautious about the near-term outlook as it reported a 2.2% increase in NAV to 515p per share for its first quarter, the three months to 30 June. The increase in the group’s portfolio valuation was just 1.4%, reflecting the more uncertain economic outlook.
The shortage of available Grade A office space in London continued to drive rental growth in the City and the West End, with rental values up 2.4% during the quarter. The group said occupancy in its offices portfolio had risen 4% to 96.6% during the quarter and it had let 800,000 sq ft of prime London office space during the first half of 2010, with rental levels significantly higher now than they were a year ago.
Rental activity was weaker in the group’s retail portfolio, as occupiers have become more cautious about the outlook for consumer spending, the group noted. However, there was still good demand from retailers for space “in the right locations”. The occupancy rate for the retail portfolio was 98.6%.
Chief executive Chris Grigg said: “Rental growth in the London office market has been good in the last six months and we expect this trend to continue, albeit at a more modest rate, with lower levels of activity in the near term. Further pressure on rental levels in retail is forecast, but we remain of the view that the best locations, where our portfolio is focused, will significantly outperform secondary locations where the supply/demand tension remains weak.”
“Overall, risks to the global economy seem to have increased in recent months and we remain alert to the potential impact of the fiscal measures needed to address budget deficits not only in the UK, but across Europe. While we would not be immune from any material reduction in consumer spending and business confidence, our prime real estate, underpinned by good tenant credit quality and high occupancy, is expected to perform well.”
