British Land’s retail parks bet pays off

British Land’s £1 billion bet on retail parks is paying off and was the main driver behind the landlord’s swing back to a profit over the summer.
Over the past three years, the FTSE 100 property group has spent £1.1 billion buying up more retail parks, which now account for almost a third of its portfolio.
“Back in 2021, I’m not sure many people were looking at retail [property],” Simon Carter, chief executive of British Land, said. “We probably split opinions as to whether that was a smart move or whether we’d lost our minds, so it’s nice to see [our expectations] borne out.”
Carter, 49, added that now was “the strongest market in a decade” for retail parks, which were becoming increasingly popular with retailers because they were relatively cheap and could be used as click-and-collect points.
Aldi, Lidl and Marks & Spencer, among many others, are opening more shops in retail parks. Zara, one of the most successful global fast-fashion retail brands, opened its first retail park store, in Glasgow, a year ago.
There have been concerns that retailers will scale back their expansion plans in the face of extra costs arising from the budget last month, but Carter thought his retail parks would be even more in demand as a result.
“If retailers are under pressure on their cost base, they’re going to continue to make the shift to the most cost-efficient [store] format,” he said.
Rents at British Land’s retail parks increased by 3.7 per cent between April and September, while valuations increased by 5.1 per cent.
The value of British Land’s overall portfolio increased by 0.2 per cent to £8.9 billion, with retail parks more than offsetting another slide in the values of its London office campuses, inner-city warehouses and its Canada Water redevelopment in southeast London.
The small increase in valuations allowed British Land to post a profit after tax of £109 million for the six months to the end of September. That compared with a loss of £61 million over the same period last year, when its portfolio was marked down by another 2.5 per cent.
Net assets per share, a key metric for property companies, increased by 1 per cent to 567p per share, while half-year underlying profits, which strip out the impact of valuation movements, also nudged up 1 per cent to £143 million. The interim dividend, to be paid on January 15, was raised to 12.24p per share from 12.16p.
Like those of its peers, British Land shares have been under pressure in recent weeks as expectations for more near-term interest rate cuts have faded, and the inflation data on Wednesday all but dashed hopes of another pre-Christmas cut. In response, British Land shares fell by 5½p, or 1.4 per cent, to close at 379¼p.