British Land portfolio value falls 10% as retail drops

The value of British Land's property fell 10% in the last financial year pushing the real estate company to a net loss of more than £1bn as the value of its retail sites fell sharply.

The FTSE 100 company said the value of its properties fell to £11.16bn from £12.32bn in the year to the end of March. Its IFRS loss after tax widened to £1.11bn from £320m a year earlier.

The value of British Land's retail sites fell 26.1% to £3.87bn as Covid-19 factors added to existing pressures on the retail sector. The value of British Land's offices rose 2.3% to £6.77bn.

British Land said its valuers made late adjustments to their calculations to take into account the impact of the Covid-19 crisis. Covid-19 accounted for a valuation decline of about 6% for the retail portfolio.

The coronavirus crisis threatens to disrupt the commercial property market in the long term by changing the way people shop and work. There has been a boom in online shopping, putting pressure on already beleaguered high streets and shopping malls, and some commentators are predicting the death of the big office after the crisis showed the viability of working from home.

British Land has collected 68% of the rent due for the March quarter with retail collections at just 43%. British Land has deferred about £35m of rent for retail and leisure customers.

In March British Land suspended its dividend to conserve cash during the coronavirus crisis. The company said it would restart dividends as soon as possible but that to do so would require significantly better rent collection and a view of how quickly retail customers and office workers return.

Chief Executive Chris Grigg said most office customers had not made major changes to their plans but that he could see the trend towards flexible working accelerating after many people worked from home during the Covid-19 crisis.

Grigg 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. 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."