What’s going on here?
British Land’s focus on out-of-town retail parks has helped the company excel in the UK property market, easing the blow of waning office property values post-pandemic and after the 2022 mini-budget.
What does this mean?
Since 2021, British Land has upped its investment in retail parks, becoming the largest direct owner and operator of such spaces in the UK. Retail parks now make up about 25% of its total assets, up from 15% in 2021, and contribute roughly 48% of its annual rental income, up from 27%. This strategic shift has paid off, with the stock climbing 21% over the past year, outperforming the broader real estate index and outpacing the MSCI All Property total returns benchmark by 300 basis points. Nearly full occupancy in these parks, compared to a 4% vacancy rate in the usual retail market, and a 3% rise in property values highlight its winning strategy.
Why should I care?
For markets: Retail parks lead the charge.
British Land has grown its portfolio by acquiring eight retail parks in the last three years, now boasting 44 properties, including major sites like Glasgow Fort and Fort Kinnaird. This move has led to a better-than-expected profit increase and smaller valuation write-downs than its peers. The popularity of click-and-collect services has boosted these parks, offering a budget-friendly distribution method for retailers compared to home deliveries.
The bigger picture: Shifting retail dynamics.
British Land’s rivals, like Land Securities, haven’t done as well, reporting a 1.1% drop in the value of their major retail properties. The success of British Land’s retail parks highlights a changing retail landscape, where lower occupancy costs and high tenant demand are reshaping investment strategies and property values. British Land’s top tenants, including Kingfisher, Currys, and Marks & Spencer, underscore the broad retail appeal and resilience of these properties.
