British Land Says Its Store, Office Values Rose Less as Recovery Stalled

British Land Co., the U.K.’s second- largest real estate investment trust by market value, said the value of its shopping centers and offices grew at a slower pace in the past three months as the economic outlook worsened.

The rise in values slowed to 1.4 percent in the company’s fiscal first quarter through June following increases of 7.5 percent and 8.2 percent in the previous two quarters, the London-based company said.

A recovery in the British commercial property market is losing steam as the country implements the biggest austerity measures since World War II. Values fell 44 percent nationwide in the two years from mid-2007 before beginning to recover in August last year, according to Investment Property Databank Ltd. The 0.5 percent gain in June was the smallest since values started to rise.

“Risks to the global economy seem to have increased in recent months,” Chief Executive Officer Chris Grigg said in the statement. “We remain alert to the potential impact of the fiscal measures needed to address budget deficits not only in the U.K., but across Europe.”

British Land fell as much as 4 percent in London trading, the biggest decline since May 25. The stock was down 3.4 percent at 453.5 pence as of 10:18 a.m. local time, cutting the company’s market value to 3.96 billion pounds ($6.3 billion).

British Land’s retail properties increased the least, with department stores rising 0.1 percent and its retail warehouses, which make up 31 percent of the company’s assets, advancing 0.6 percent. Retail rents didn’t grow at all during the period, the company said.

“The retail environment will continue to be tough,” Grigg said on a conference call with reporters. “The opportunity for growth in consumer spending looks pretty muted right now.”

Office values gained by 2.4 percent, boosted by a shortage of top quality space in London. British Land is talking to potential partners to build a skyscraper nicknamed the Cheese Grater in London’s main financial district.

“The early rapid recovery is behind us now, which suggests we may be heading for the doldrums,” Malcolm Frodsham, IPD’s research director, said in a statement yesterday.

To contact the reporter on this story: Chris Bourke in London at cbourke4@bloomberg.net.

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