The values of prime London places of work are “near the underside” after a brutal 12 months for industrial property traders, in response to the pinnacle of one of many UK’s largest landlords.
British Land boss Simon Carter mentioned the worth of good-quality London places of work ought to stabilise after sharp falls in latest months, however warned of extra ache to come back for much less fascinating buildings.
“In London places of work, I believe we’re near the underside now for these, and specifically for our portfolio,” he mentioned. “You will notice secondary workplace values proceed to say no.”
The FTSE 100 group on Wednesday reported a 12 per cent annual fall within the worth of its £9bn portfolio, which incorporates main holdings round Broadgate within the Metropolis of London and Paddington. Values of its properties within the Metropolis dropped virtually 15 per cent within the 12 months to the tip of March.
The valuation decline drove British Land to a £1bn pre-tax loss, down from a greater than £900mn revenue the 12 months earlier than. The group’s underlying revenue, which omits property valuation swings, rose virtually 7 per cent from the 12 months earlier than to £264mn, and like-for-like web rental earnings elevated 6 per cent.
Carter mentioned the hit to property values mirrored the sharp rise in rates of interest this 12 months, as central banks attempt to management inflation. He expects the worth of British Land’s portfolio to stabilise, and even enhance in some sectors, supported by rising rents and powerful demand for contemporary, well-located area.
British Land agreed new leases for 3.4mn sq ft of area within the 12 months, at rents 15 per cent increased than the estimated rental worth initially of the monetary 12 months. Carter mentioned the corporate’s retail parks, specifically, ought to improve in worth, with occupancy on the highest degree in 15 years at 99 per cent and rents rising for the primary time in 4 years.
Rival FTSE 100 landlord Landsec on Tuesday reported a smaller drop of about 8 per cent in property values. Colm Lauder, analyst at Goodbody, mentioned “most sectors and property varieties inside each portfolios” had reached “a degree at which we see prime belongings, notably London places of work and logistics, bottoming out.”
“Nevertheless, with transactional proof nonetheless so skinny within the UK market, we are going to want elevated deal movement to verify these tendencies,” he added.