According to British Land, a disinterest in purchasing property has a negative impact on valuations.

BENGALURU: The rapid rise in borrowing costs, according to British Land Co, has reduced investors’ appetite for property acquisitions, causing valuations to fall in the first half. The UK commercial property sector’s tentative recovery from pandemic lows is being suffocated by aggressive interest rate hikes to tame inflation and deepening recession fears.

British Land, the owner of London office buildings such as Broadgate, Regent’s Place, and Paddington Central, reported a 2.7% drop in office asset valuations in the first half of the year. British Land shares fell more than 2% in early trading.

British Land has issued a valuation warning, as has its larger peer Land Securities. After reporting a first-half loss due to challenging economic conditions, Landsec slowed the pace of its reinvestment plans. Because of the low rents and suitability for online retail, British Land was optimistic about the demand for its retail parks. It is the country’s largest direct owner and operator of retail park assets.

Retail parks, which account for 60% of its retail portfolio, are gaining popularity among retailers facing shrinking margins and cost pressures as the UK’s cost-of-living crisis worsens. In a note, Interactive investor analyst Richard Hunter wrote, “Retail parks are experiencing a renaissance as trading habits return to pre-pandemic levels and more retailers embrace the omnichannel offering.”

British Land’s half-year loss after tax was 34 million pounds, compared to a profit of 370 million pounds the previous year. In the six months to September 30, it reported a 13.3% increase in underlying profit to 136 million pounds ($161.5 million), owing to strong leasing, including the lease renewal of one of its London properties by Facebook owner Meta.

EPRA (European Public Real Estate Association) Net Tangible Assets, a key measure that reflects the value of its buildings, fell 4.4% to 695 pence as of September 30, according to the FTSE 100 Company.