Rise in lettings welcomed by British Land

The group, which owns half of Sheffield's Meadowhall shopping centre, has retail developments across the region including St Stephen's in Hull and Parkgate in Rotherham.

It said strong lettings growth during the six months to the end of September helped lift its occupancy rate from 96.6 per cent to 98 per cent.

Some 850,000 sq ft of new lettings and renewals were signed during the period, including 16 long-term lettings at Meadowhall, where it added retailers such as Phase Eight, LK Bennett and Guess.

That helped lift Meadowhall's occupancy rate to 99.2 per cent by the end of September, up from 98 per cent at the end of March, with an average lease length of 10.8 years.

Another key letting was the 18.2 year pre-let agreement it signed with Swiss bank UBS on 700,000 sq ft of office space it is developing in central London.

At Parkgate, a 562,000 sq ft shopping park near Rotherham, it secured US home electrical goods retailer Best Buy for a 47,000 sq ft unit on a 10-year lease.

"We've had a good start to the year with strong letting activity improving occupancy to 98 per cent and driving a further increase in (portfolio) valuation," said chief executive Chris Grigg.

British Land, the UK's biggest Real Estate Investment Trust (REIT), said the value of its portfolio rose by 2.6 per cent during the period to 8.9bn, with growth roughly balanced between its first and second quarters.

The group said its decision to invest 1.5bn into central London developments was its most significant move during the period.

The landlord plans to develop 2.1m sq ft of prime office space in the City "at a time when supply is expected to be restricted".

It said central London offices currently make up about a third of its portfolio and it expects to grow this to around 40 per cent once its development programme is complete. But it said this exposure could shrink in time as it sells on developments.

"We will be driven, to some extent, as we see opportunities going forward," said Mr Grigg.

"We would intend over time to be more trading orientated in the City, so in a way that you could see that (portfolio weighting) going up in the short term, but potentially down longer term as we seek to take advantage of the value we create by development."

The group's lettings growth comprised 488,000 sq ft to the retail sector, while it signed off 350,000 sq ft in its London office portfolio.

"Looking forward, we expect to be able to exploit the growing demand supply imbalance in London offices and to benefit from a growing need from a significant number of retailers to take new space in the best locations," said Mr Grigg.

British Land also hopes to pounce on assets being put up for sale by "unwilling holders" such as banks. However, Mr Grigg said British Land is "vigilant" of next year's VAT increase to 20 per cent.

British Land's net asset value rose 4.2 per cent to 525p a share over the six-month period, against 504p at the end of March.

In retail, the landlord said it continued to benefit from an "ongoing polarisation" between prime and secondary sites, as retailers seek out the best locations.

The group's underlying pre-tax profit was 127m, compared with 129m in the first half of 2009. It maintained its second-quarter dividend at 6.5p, contributing to a total first-half dividend of 13p. Shares in the group shed 3.4 per cent to close at 489.7p.

British Land's 2.6 per cent hike in portfolio value was below the 7.3 per cent reported by Great Portland and 3.4 per cent booked by Land Securities.

"Our favourites are Great Portland and Land Securities for their higher West End exposure and better performance. We reiterate our 'sell' recommendation on British Land," said Collins Stewart.

British Land did not update on the value of Meadowhall, which last stood at 1.27bn at the end of March.

The group sold half its stake in Meadowhall to London & Stamford Property last year to reduce its exposure to big single assets.

It has outline planning permission for the next phase of its development, Meadowhall Metropolitan, a 2.2m sq ft mixed use scheme, including offices, homes and a new riverside park.