‘Last mile’ logistics and flight to quality gives British Land reason for optimism
British Land has said the UK economy has been more “resilient” than expected, as the property developer reaches close to 100 per cent occupancy across its urban logistics schemes and retail parks.
In a half year trading update, the commercial property giant said that underlying profit grew 3.4 per cent to £142m but IFRS loss after tax widened from £32m last year to £61m.
The company’s share price rose over six per cent this morning as the UK market responded to the news.
Despite this, chief Simon Carter said that he was pleased with the performance thanks to “another strong period of leasing and good cost control”.
Two of the firm’s star performers, retail parks and urban logistics have reached close to 100 per cent occupancy during the term.
The developer behind Broadgate Circle said that retail parks have an underlying vacancy of 0.8 per cent compared to UK retail market vacancy of 13.9 per cent.
In recent months, retail parks are proving a popular option because they are “low maintenance” and cheaper than taking space at a traditional high street store or shopping centre.
Meanwhile, its urban logistics schemes – which are warehouse spaces located in cities – have also benefited from the rise in demand for e-commerce.
British Land owns a host of these sites within the M25 and Zone 1 of London, where supply is highly constrained.
The company said that its portfolio is focused exclusively on “densification and repurposing opportunities in Central London” and now says its urban logistics development pipeline has a gross development value of £1.3bn.
Last mile logistics are powering the need for distribution centres closer to population centres.
Carter added: “We are benefitting from our decision to pursue a value-add strategy across campuses, retail parks and London urban logistics.”
“These submarkets have the strongest occupational fundamentals and highest rental growth within the office, retail and logistics sectors. We now expect ERV growth at the top end of our previous guidance for FY24.”
“Since we reported our FY23 results in May, market interest rates have risen further and are expected to stay higher for longer, but the economy has been more resilient than expected.”