British Land slumps to £1bn loss after online shopping boom ends

ONE of Britain’s biggest property developers has swung to a £1bn loss after the end of the online shopping boom dampened demand for its warehouses.

The value of British Land’s urban logistics portfolio fell by 24pc in the year to the end of March.

But Simon Carter, the chief executive of British Land, said the company hoped to profit from the lack of new warehouse space available. “In the long term, we expect valuations to go back up, specifically in our retail parks and office assets,” he said.

“However, even though the occupational London warehouse market remains strong, we expect logistics to remain flat.

“Although more recently the outlook for the UK economy has improved, continued macroeconomic uncertainty remains our central case for the next 12 months.”

During the pandemic, online shopping pushed up warehouse values as demand for distribution centres were buoyed by people staying at home. Fol- lowing Covid, retailers including Amazon and Asos have committed to shed empty warehouse spaces as demand for online shopping slows.

Amazon opened hundreds of warehouses around the world during the pandemic, in an effort to capitalise on the boom in online spending.

However, demand from shoppers for online orders has taken a hit in recent months, with 2022 having been the toughest year for many e-commerce giants to date. In the final quarter of last year real estate agent Savills recorded the lowest demand for warehouse space since 2020, dropping by 41pc from 2021 to 2022. While demand has tapered, Mr Carter said companies are still looking for warehouses, and British Land is well positioned because of the shortage of new space coming to the market.

“Take-up year to date was at 1.5m sq ft and rents continue to grow with prime rent now £35 per sq ft,” he said. “This reflects the strength of demand for very centrally located space.

“However, as a very low yielding sector, sentiment across the wider UK logistics market has been impacted by rising interest rates. Investment activity reduced over the period with a slowdown in stock coming to market as sellers choose to delay sales where they have optionality.”

Mr Carter also said that British Land would be focusing on its retail parks, as he said the company has tenants in 99pc of its big shops.

He said: “Retail parks are retailers’ preferred format, as they are large and compatible with the way people shop, supporting retailers’ omni-channel strategy, allowing for click-and-collect, ship-from-store and in-store returns.”