British Land last week sold two shopping centres in Slough for £200m.
They had been on the company’s books at £220m.
This deal, small in absolute terms, may only reflect a little local difficulty. But it could also be a cipher for a change in mood in the UK retail property market.
Yields on shops, which have long been falling amid huge demand for real estate, may have ticked up again – suggesting a drop in values.
Many experts believe that secondary shopping centres and shops are particularly exposed when the property boom comes to an end.
That time may have come, reckons Stephen Hester, chief executive of British Land.
Investors appeared to take fright at his comments on Tuesday, even though Mr Hester has long maintained a studiously cautious outlook.
“There is lots of evidence that the process of yield shift is more or less over,” he said.
Investors in parts of the property market where prices had risen too much could be disappointed, he added.
British Land’s third-quarter results showed that there was almost no growth from market “yield compression”.
Yet rents grew faster than the industry average.
It is unfortunate for Mr Hester that the loss crystallised on the Slough deal helped to drag down British Land’s figures.
After all, the company has worked hard to sell off secondary properties in the past two years since he took over.
Mr Hester sought to reassure analysts and investors on Tuesday that the company’s large office developments in central London, where rents are rising, would compensate for any wider investment market slowdown.
However, the figures may add to concerns about the UK introduction of real estate investment trusts (Reits), designed to appeal to ordinary investors, just as the market is peaking.
In the US, the biggest Reit market in the world, there are fears of a bubble with dividend yields having fallen to 3.8 per cent in January – 100 basis points below 10-year Treasury notes.
UK Reits are likely to yield even less at current share prices – possibly less than 3 per cent.
John Fraser-Andrews, a real estate analyst at HSBC, recently advised clients to be “underweight” in the property sector.
Yet the wall of money targeting commercial property has not dissipated.
Indeed, some observers believe that the wave of more than 20 public-to-private Reit deals in the US could still happen in the UK.
Here, Reits are only trading at slim premiums to net asset value. In Europe many Reits are at premiums of 30 per cent or more.
In addition, UK Reits are starting to benefit from a flow of new money from abroad, especially from the US.
At British Land, for example, overseas shareholders have increased from 10 per cent to 45 per cent in three years. “We can see no reason for the sell-off in UK property stocks,” Harm Meijer, analyst at JPMorgan, insisted on Tuesday
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