British Land loses £572 million over just three months

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The firm posted losses of £572 million for the first quarter compared with profits of £266 million in the same period a year ago.

The meltdown came as the slump in the property market wiped 5% off the value of the company's assets in the three months to the end of June - with City offices down 7.2% and West End offices down 4.3%.

Chief executive Stephen Hester said conditions were "challenging" as "the weak financial markets have been driving property prices down and that process continues.

"Clearly our customers are beginning to be affected by the broader economic slowdown. Our buildings are almost full and our rents are going up, but we can see signs of the economic squeeze on our customers."

British Land, the second largest real-estate investment trust (REIT) in Britain, with properties worth £12 billion, also postponed the building of its flagship Cheesegrater skyscraper at 122 Leadenhall Street in the City, amid falling demand for new office space.

It recently completed the 201 Bishopsgate building, which is now 84% let, while next door The Broadgate Tower is due to complete shortly and is 42% let. However, its giant Ropemaker Place development, due to be completed next year, so far has no tenants.

"It's our aspiration to have up to a third of it let by the time it's completed," said Hester.

Like-for-like rents rose 6.3%, with a resilient performance from retail sites. Office rents fell 2.1%, as demand for new space in the City and beyond was hit by the financial sector turmoil.

Hester said conditions now are worse than they were three months ago when he compared the market to a battlefield. "We are at a later phase of the economic cycle," he said.

"Are things gloomier than three months ago? Yes, they are. But that was to be expected. We are also three months closer to coming out of the downturn."

Underlying profits, which strip out the fall in property values, dipped from £76 million to £74 million.

Net asset value per share fell 10% to 1212p and underlying profits, which strip out the fall in property values, dipped from £76 million to £74 million.