British Land LON: BLND said strong leasing momentum across its London campuses and retail parks is supporting earnings growth, as executives pointed to tight supply, resilient occupier demand and active asset management as key drivers of performance.
Chief Executive Simon Carter told investors that Campuses and Retail Parks now account for 90% of the business and are benefiting from “strong occupational fundamentals,” with net absorption high and supply constrained in both markets. Carter said the company expects to outperform inflation going forward and guided to estimated rental value, or ERV, growth of 3% to 5%.
“We have the right real estate in the right sectors and locations where demand is strong and supply is constrained,” Carter said, adding that British Land remains confident in its ability to deliver attractive earnings growth and total returns through the cycle.
Record campus leasing helped lift occupancy
Carter said London office demand remains robust despite uncertainty around hybrid working and artificial intelligence. He said net absorption of space is at a record high, with four companies upsizing for every one that is downsizing. Demand is 57% above the 10-year average, and space under offer is 50% higher than a year earlier, he said.
The company completed a record £143 million of leasing last year across its campuses. Carter said British Land represents about 5% of the London office market but accounted for 15% of reported leasing last year and 33% in the fourth quarter.
Kelly Cleveland, Head of Real Estate and Investment, said British Land completed 1.7 million square feet of campus leasing, 6% ahead of ERV and 20% ahead of previous passing rents. Occupancy increased to 95% at year-end from 92% in September, helped by leasing progress at assets including Norton Folgate and 155 Bishopsgate.
At 1 Triton Square, Cleveland said the company took the building back from Meta in late 2023, received a £149 million surrender premium, brought in Royal London as a joint venture partner and repositioned the building for science and technology occupiers. The building was 94% let, including all lab space, seven months after practical completion, with rents 40% above what Meta had been paying. Occupiers include Gilead and Anthropic, which signed for 158,000 square feet.
Science and technology demand remains a focus
Carter said artificial intelligence and data science businesses have become a meaningful source of demand, with British Land tracking 2.5 million square feet of active demand. He said London is the leading international destination for such companies because of its talent base, and Regent’s Place is benefiting from its location in the Knowledge Quarter.
The company’s acquisition of Life Science REIT added assets in the Golden Triangle and increased science and technology exposure to 35% of the campus footprint on a pro forma basis. Carter noted that the Life Science REIT name “understates the opportunity,” saying labs represent only 6% of the acquired portfolio and that the opportunity spans the broader science and technology ecosystem.
In the financial presentation, David said the acquisition is immediately earnings accretive, adding £0.003 to EPS in FY27, with additional upside expected from leasing newly delivered space at Oxford Technology Park. British Land has repaid legacy company debt using cheaper facilities, integrated five assets and placed 56,000 square feet of newly delivered space under offer at Oxford Technology Park.
Retail parks remain nearly full
British Land also highlighted continued strength in retail parks, where Carter said vacancy has fallen 340 basis points since 2021. He said the company’s portfolio totals 10 million square feet of space within 30 minutes of half the U.K. population.
Cleveland said retail park leasing totaled 1.5 million square feet at 9% above ERV. Deals are now being agreed above previous passing rents, which she called “a key inflection point” after several years in which rental growth absorbed historic overrent.
The company said retail park occupancy is 99%, with rental growth of 4.4% last year. Carter said British Land is leasing space at around 6% above previous passing rent.
Cleveland pointed to Orbital Retail Park and Telford Forge Shopping Park as examples of active management. At Orbital, British Land upsized M&S Food into a former Homebase unit and re-let the smaller space, delivering a 21% internal rate of return since acquisition. At Telford, the company expects combined returns of around 11% after agreeing a deal to bring in a major national retailer and relocating tenants into vacant units.
Profit, balance sheet and FY27 guidance
British Land reported underlying profit growth of 5% and underlying EPS growth of 1%. Like-for-like net rents grew 6%, adding £0.021 to EPS, while development leasing added £0.014 to EPS. Administrative costs fell 9% during the year and are down 16% since 2022.
Higher finance costs reduced EPS by £0.034. David said £0.01 of the reduction reflected a 30-basis-point increase in the weighted average interest rate to 3.9%, while £0.024 reflected interest that was previously capitalized on developments moving into the income statement as schemes completed.
The board proposed a final dividend of £0.108, taking the total payout to £0.2312, up 1%, in line with the company’s policy of paying out 80% of underlying EPS.
Portfolio values increased 2.3% over the year, and net tangible assets per share rose 4% to £5.90. Including dividends paid, British Land delivered an 8.1% total accounting return, within its 8% to 10% target range for the first time since 2022.
The company completed more than £3 billion of financing activity during the year and reported £1.6 billion of liquidity, with no refinancing requirement until 2029. Loan-to-value stood at 39.2%, group net debt to EBITDA was 7.7 times and Fitch maintained an A rating with a stable outlook.
For FY27, British Land said it expects like-for-like growth at the top end of its 3% to 5% target range, supported by development leasing completed over the past 18 months that is expected to deliver about £40 million of rent. The company guided to at least £0.305 of EPS for FY27, representing 6% growth from FY26.
Management addresses investor questions
During the question-and-answer session, Carter said British Land manages risk from smaller science and technology occupiers by using shorter leases, limited rent-free periods and rent deposits for flexible Storey or work-ready space. For larger headquarters space, he said the company requires stronger credit profiles, while acknowledging that some fast-growing technology companies may still be loss-making.
Asked about Canada Water, Carter said the company had taken advantage of changes to London housing rules through a Section 73 application, reducing the affordable housing requirement and adding more flexibility to the scheme. He said office demand there had been quiet over the past two years but had recently shown a “noticeable pickup” in viewings and negotiations.
On capital allocation, management said British Land remains focused on recycling capital from mature, lower-returning assets into higher-returning opportunities, including retail parks and de-risked campus developments. Carter said the Life Science REIT acquisition should not be viewed as a one-off, provided future opportunities are strategically aligned, earnings accretive and broadly neutral to net tangible assets.
About British Land LON: BLND
Our portfolio of high quality UK commercial property is focused on London Campuses and Retail & London Urban Logistics assets throughout the UK. We own or manage a portfolio valued at £13.0bn (British Land share: £8.9bn) as at 31 March 2023 making us one of Europe's largest listed real estate investment companies. We create Places People Prefer, delivering the best, most sustainable places for our customers and communities. Our strategy is to leverage our best in class platform and proven expertise in development, repositioning and active management, investing behind two key themes: Campuses and Retail & London Urban Logistics.
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