British Land hails London resilience but reins in spec building

British Land has insisted London’s property market will shrug off Brexit uncertainty, despite reining in its speculative development pipeline.

The developer, which owns or manages £19bn worth of UK properties, said it expects an “uncertain environment for some time” as Britain negotiates its withdrawal from the EU, but insists the capital is showing resilience.

The firm told investors: “Our focus on London remains. We expect London to continue as a leading global city reflecting its diverse pool of intellectual capital and reputation for innovation, as well as its culture, language and strong regulatory and legal framework.”

While British Land admitted some office occupiers were thinking twice about their commitment to the capital, it insisted there had been a flight to quality space: “London occupiers, particularly financial institutions, are making contingency plans but there is a wide range of possible outcomes here…

“Although we are seeing businesses taking longer to commit and being more thorough in assessing options, we see polarisation of both occupier and investor demand accelerating with an increasing focus on the best quality space.”

The developer has major developments planned at Broadgate and Canada Water in London and the extension of Meadowhall near Sheffield.

But it said its appetite for speculative development in the near term had reduced, with the equivalent of just 4% of its portfolio value committed to schemes without a pre-let.

In the wake of the Brexit vote, British Land said it reduced its risk threshold for speculative development to 8% of overall portfolio value, down from 10% the previous year.

Its biggest scheme on site is the 520,000 sq ft redevelopment of 100 Liverpool Street at Broadgate, where Sir Robert McAlpine began construction in December.

Looking ahead, British Land said it expects to start work on its 1 Triton Square office scheme at Regent’s Place - which is fully under offer - in March, and to commit to refurbs of 135 Bishopsgate and 1 Finsbury Avenue in Broadgate “in the coming months”.

Its BDP-designed 322,000 sq ft leisure extension to Meadowhall is expected to start on site next year, subject to planning permission.

British Land said it aims to submit a planning application for its mammoth 46-acre, 5.5 million sq ft redevelopment of Canada Water by next March.

The site in South-east London, which incorporates a dated shopping centre and a former Daily Mail printworks, is earmarked for 2 million sq ft of workspace and 1 million sq ft of retail and leisure space, alongside educational and cultural uses and up to 3,500 new homes.

In its results for the year to March 2017, British Land posted a 7.4% increase in underlying profit to £363m, up from £390m the previous year.

The firm was boosted by the £575m sale of its 50% stake in the Laing O’Rourke-built Leadenhall Building and a 1.6% uptick in property values in the second half, although its portfolio value was 1.4% down for the year overall due to the impact of the Brexit vote.