British Land sees retail and Covid-19 disruption hit property values
Property giant British Land on Wednesday showed how the virus crisis is hurting real estate values, but insisted demand for London offices is holding up
Chief executive Chris Grigg said: “Plenty of people are looking past the next 12 and 24 months, realising they want to have the best offices in the best locations to attract talent.”
He said businesses are aware there is a shortage of new office space being developed for the coming years, and many want to sign up now to secure modern space.
Interest comes despite industry concerns that occupier demand could suffer as firms embrace working from home.
Griggs' comments came as British Land said the value of its property empire dropped 10.1%, or £1.2 billion, to £11.15 billion in the year to March.
It saw offices have an uplift of 2.3%, but the fall was led by the retail properties division, down 26.1%. The division was impacted by well-documented headwinds, such as brands grappling with tough retail conditions seeking rent cuts or closures.
British Land was then hit by Covid-19 disruption. A number of its tenants in the retail and leisure sectors had to shut sites during the lockdown. That made it difficult for a number of companies to pay rent. British Land offered some retail and restaurant tenants rent holidays and agreed to defer a number of quarterly rent payments.
The firm saw 68% of the March quarterly rent collected; 97% offices and 43% retail.
Grigg today said: “Near term, we are expecting the offices market to be more cautious, but we continue to conduct virtual viewings and are encouraged by negotiations we are having.”
He added: “In retail, given current valuations and the lack of liquidity in the investment market, our focus is on delivering value though asset management, working to keep our places full and exploiting demand for assets which support an online offer. Our financial position is robust with debt low, significant covenant headroom and access to £1.3bn of undrawn facilities and cash so we are well placed to weather today's challenges and succeed in the long term."
