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British Land posts slump in property values after interest rate hikes

Commercial landlord British Land has revealed a plunge in the valuation of its offices and shops as the FTSE 100 firm was weighed down by higher borrowing costs.

Shares in the company, which owns 50% of the Meadowhall shopping centre, dropped on Wednesday as a result.

The company told investors that the value of its property portfolio slid by 2.8% to £9.6 billion over the half-year to September, compared with the same period last year.

Simon Carter, chief executive officer, said the firm’s property yields moved higher due to recent interest rate increases by the Bank of England, which now sit at 3%.

Nevertheless, he said this impact on property valuations has partly been offset by “rental growth”.

It said the stronger rental market and cost control resulted in a 13.3% increase in underlying profits over the six-month period.

Mr Carter said: “Our good operational performance in the half reflects the high quality of our portfolio and reinforces our conviction in our value-add strategy which is focused on sectors with pricing power.

“We go into the second half with a strong leasing pipeline, but mindful of the weaker macro environment in which we are operating.

“Well-timed disposals strengthened our balance sheet and combined with the quality of our platform and our continued commitment to capital recycling, mean we are well placed to exploit our attractive development pipeline and the opportunities now emerging in the market.”

Industry analysts said they believe British Land’s long-term strategy could work well despite worries over the next half-year.

Hugh Carrow, analyst at Liberum, said: “We still believe the allocation shift towards office-led campuses and selective retail and fulfilment will be rewarded when more ordinary economic conditions prevail.

“However, we maintain caution on yields and leasing tension in H2.”

Shares in British Land dipped by 2.1% to 387.9p in early trading.