British Land confirmed the leasing of 567,000 square feet of property over the first quarter, with rents 4.8% ahead of the estimated rental value (ERV). The group has a further 1.1 million square feet under offer, at prices 6.8% ahead of ERV.
Disposals and exchanges totalled £83mn in the period, with a further £223mn of property under offer. The group also purchased Telford Bridge retail park for £30mn.
Full-year guidance has been reiterated, with like-for-like net rental growth expected to be at the top end of its 3-5% target range. The group expects earnings per share to be at least 30.5p (consensus: 30.7p).
The shares were broadly flat in early trading.
Our view
British Land continues to see demand outstrip supply, driving strong leasing momentum across its core markets in the first quarter. That’s given management the confidence to reiterate full-year guidance, which currently looks well within reach. It’s also making positive progress recycling capital from assets that don’t fit the longer-term plan into more attractive projects.
London campuses remain a priority, with demand for high-quality, well-connected office spaces driving strong leasing activity. British Land already operates some prime real estate in the City, and here demand for new space is improving with office usage back to pre-Covid levels.
The science & technology sector is a key part of this strategy. It accounts for about 35% of British Land’s campuses, but that could rise to 50% by the end of the decade. Recent progress at key sites like 1 Triton Square shows that the company is successfully attracting tenants in this fast-growing field, especially as AI fuels the sector’s momentum.
Urban logistics is another exciting growth area. The company is focusing on central London, where demand for warehouse space is high, and supply is tight. Projects like the recently completed Mandela Way multi-storey warehouse show that British Land is adapting to trends like e-commerce and same-day delivery.
Its retail parks have also been a strong asset of late, in terms of both rental growth and capital appreciation. These parks are popular with retailers because they are affordable, easily accessible, and adaptable, resulting in high occupancy rates of 99% at the last count. The group’s growing portfolio in this area is well-positioned to benefit from continued demand for out-of-town shopping locations.
Development is making a comeback, with a focus on urban logistics and campuses. Work is progressing on key sites like 2 Finsbury Avenue and Broadgate Tower. With rents rising, the outlook for new developments is improving after a tough period, although signs of build-cost inflation returning should be watched carefully.
The company’s finances remain strong, with enough funding available to help support future growth and a respectable 5.9% forward dividend yield. However, the new development focus and the risk that new sites don’t perform as planned could limit the pace of dividend growth moving forward. As ever, no returns are guaranteed.
British Land is well-positioned for the future, with its key markets already showing strong rental and leasing momentum. Its focus on retail parks, urban logistics, and campuses reflects a shift to areas with the strongest potential for growth. But the step-up in development activity brings execution risk, and any reversal in occupier demand or rise in funding costs could weigh on returns.
Environmental, social and governance (ESG) risk
Broadly, real estate is relatively low risk in terms of ESG. One of the principal drivers of this risk is the capacity to integrate material ESG considerations into decision-making, risk management and public reporting; the most material ESG considerations are environmental, like carbon emissions reduction, energy efficiency and physical climate risk. The rise of hybrid working has also reduced demand for commercial property, making product governance and customer satisfaction a top priority. Other risks to monitor include labour relations, business ethics, and emissions & waste.
According to Sustainalytics, British Land’s overall management of material ESG issues is strong.
British Land Co. Plc has a robust environmental policy, with a portion of executive remuneration explicitly tied to sustainability performance targets. The company also has an effective whistleblower program. Additionally, board-level oversight is in place for ESG matters. However, its ESG reporting does not yet fully align with leading industry standards.
British Land key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.