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Commercial landlord British Land has seen more than £2 billion wiped off the value of its retail sites and offices as the pandemic and lockdowns wreaked havoc on its estate.
The group, which owns shopping centres including Meadowhall in Sheffield and office buildings in London, reported a 10.8% tumble in the value of its property portfolio, from £11.2 billion to £9.1 million at the end of March.
The firm posted its third straight year of annual losses, with pre-tax losses of £1.05 billion for the year to March 31 against losses of £1.1 billion the previous year.
On an underlying basis, profits reduced by more than a third, down 34.3% at £306 million as many of its office block and retail tenants were left unable to pay rent for most of the year.
Its retail sites took the brunt of the hit from the pandemic, with values plunging by 24.7%, while its suffered a 3.8% fall across offices.
The group was able to collect just 71% of rent across its retail estate, with many shops closed for most of the year due to coronavirus restrictions.
But by contrast, it collected 99% of office rents.
British Land said it had seen an “encouraging” performance across its estate since non-essential retail reopened on April 12, with shopper numbers and sales recovering to pre-pandemic levels.
However, it cautioned retail markets are set to “remain tough and we expect rents to decline further”.
It added: “We are seeing signs of stabilisation on retail parks and our central case is an additional rental decline of around 5%… shopping centres, which have been more impacted by Covid-19, are likely to take a little longer to stabilise.”
With flexible homeworking set to stay, British Land is also targeting higher-end campus-style developments, mixing retail, office, meeting and housing space.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “There is no mistaking the challenge British Land is facing.
“It’s not only being threatened by the rising tide of homeworking, but like a sandcastle, it faces fresh erosion from the heavy spade of e-commerce.
“The quality of its portfolio probably means it’s one of the better placed property companies in the UK, but the disruption ripping through the industry will not leave it undamaged.”