“There is no mistaking the challenge British Land Company PLC (LON:BLND) is facing. It’s not only being threatened by the rising tide of homeworking, but like a sandcastle, it faces fresh erosion from the heavy spade of e-commerce.
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Losses For British Land
It has reported a full year post tax loss of £1 billion, taking a huge hit from the 10.8% write down in the value of its property portfolio to £9.1 billion. Underlying profit fell 34%, to £201 million as rental income fell from tenants.
It’s been getting its house in order to cope with these shifting sands, by selling £1.2 billion in assets, including from £556m retail space and £643m offices sales.
The company is recognising that the working from home revolution brought about by Covid, isn’t likely to be reversed any time soon. Even when the pandemic subsides, many companies are still likely to allow staff to work remotely, inspiring a reappraisal of their office needs.
British Land has gone upmarket in terms of office space by focusing its efforts on providing top notch campus style developments, including Broadgate and Canada Water in London. By providing a high-end mix of retail, office, meeting and housing space, it aims to give firms the flexibility they need.
Investment In Retail Parks
In retail it’s targeting the value space, increasing investment in retail parks which it sees as a future cash cow, as they have bounced back much more strongly in terms of footfall than town and city centres. It is paying £148 million to acquire the outstanding interest in Hercules Unit Trust, which invests in retail parks. The company is also buying the Biggleswade A1 Retail Park for £49 million.
British Land is still showing resilience, despite the huge problems the pandemic has presented. Rent collections have been strong, with 83% of 2021 payments coming through, representing 99% of office rents and 71% of retail. The quality of its portfolio probably means it's one of the better placed property companies in the UK, but the disruption ripping through the industry will not leave it undamaged."
Article by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.
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