ii view: British Land reassures

Property owner British Land reports strong progress in office leasing, but retail remains a challenge.

Operational update

• Further strong progress on Campus Leasing
• Continued good performance in a challenging Retail market

ii round-up:

A Real Estate Investment Trust (REIT), British Land (LSE:BLND) owns manages and develops a portfolio of properties across the UK worth over £16 billion. Properties are comprised of a mixture of office-led London campuses, retail destinations and a residential business. 

Since 2010, it has been shifting the balance of its portfolio towards its campus-focused London offices business, which now accounts for 51% of assets. Examples include Broadgate off London Liverpool Street train station, Clarges offices London Mayfair and London Paddington 1 Sheldon Square. 

Its retail properties, now accounting for 45% of its assets, include Meadowhall Sheffield, Drake Circus Plymouth and the Wheatley estate Doncaster. 

This latest operational update proved to be broadly reassuring. Strong progress has been made on Campus Leasing. For its number 100 Liverpool Street complex, Bank of Montreal had committed to 60,000 square feet, while Sumitomo Mitsui Banking Corporation Europe had committed to a further 22,000 square feet, taking their total occupation to 184,000 square feet. 

For its Retail outlet properties, leasing activity for the 5 months to August 2019 had totalled 500,000 square feet, generating headline rents of £7.2 million. 

The share price was little changed in late morning UK stock market trading. 

ii view:

Changing shopping habits have been altering the property landscape for some years now. Consumers' move towards destination shopping centres with lots of parking and eating outlets in abundance have seen more traditional high streets and their shop value rents suffering. The rise of online shopping has increased pressure further, with delivery from a warehouse preferable for many consumers than a trip to the shops. 

British Land has been attempting to navigate these changes. A centre of gravity move towards London office campuses has been a strategy response. 

For investors, the dividend payment, underwritten by the group's £500 million plus annualised rental income, provides the major attraction. A prospective dividend yield of around 5.5% remains attractive in today's low-interest rate environment. 

Positives: 

• The value of its office portfolio rose by 1.1% over the last financial year
• Progressive dividend policy

Negatives:

• The value of its retail portfolio fell by 11.1% over the last financial year
• Brexit could see some of its office tenants move from London

The average rating of stock market analysts:

Weak hold