London’s feel-good effect is at last spreading to the regions with domestic and international retail chains scrambling to open new stores, according to Britain’s second biggest property company. London office space continues to be in high demand, British Land said in its 2013 third-quarter statement, but it’s a nationwide retail revival which is starting to power the commercial property market.
“Overall, the UK property market had a strong quarter with London strengthening further and investment spreading out into the regional markets,” said BL chief executive Chris Grigg.
Although the number of high street and shopping centre visitors was still disappointing, footfall had improved on last year. But the biggest retail shift, he added, was in the type of businesses looking for premises.
“Over the last few years we have been approached by stores such as Poundland, of which we need to be careful as their presence can cause tension between footfall and other operators,” Grigg explained. But with people still unsure about their income and cautious about spending, most are choosing to improve their existing home rather than move. “We have therefore seen a wave of interest from homeware and kitchen manufacturers,” he added.
In the three months to the end of December, like-for-like occupancy rose 0.3 percentage points to 97.1 per cent with British Land letting or renewing the leases on 386,000sq ft of its retail space. Its biggest lease of the quarter was letting the 30th floor of the Leadenhall Building — popularly known as the Cheesegrater — to serviced office provider Servcorp. The deal is the first single-floor letting in the City block, of which British Land is half owner.
There were also some significant sales in line with BL’s strategy of repositioning its retail portfolio. Since the end of the half year it had disposed of £405m worth of property, including the £89m sale of Basildon’s Eastgate Shopping Centre. Negotiations were underway, the statement added, on the sale of another £200m worth of retail sites.
Shifting its retail strategy from smaller food stores to “focus on highest quality locations” would, it confirmed, continue throughout the coming year. Among its £196m retail acquisitions British Land had spent £83m investing in high quality Sainsbury superstores. “In retail, the economic recovery is having a positive impact on confidence and we continued to benefit from retailers looking to take space in the best quality locations,” said Grigg.
Site work was also underway on British Land’s biggest investment project at Clarges, in central London. It paid almost £130m in 2012 for the site overlooking Green Park. When completed the development will include 63,000sq ft of luxury apartments above 7,900sq ft of ground floor shops. There will also be 91,000sq ft of high quality offices in a separate block, with new headquarter offices for the Kennel Club.
After investor group criticism of British Land’s relationship with accountants Deloitte, the property group also announced it was switching its auditor from Deloitte to PricewaterhouseCoopers. British Land is the latest in a line of big companies ringing the changes ahead of EU regulation that will see require large corporates to rotate their auditor to open up competition in the accountancy industry.
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