British Land hit by property value dive

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The London offices giant, which is putting up a number of landmark City office blocks including the Cheese Grater, blamed current financial-market storms, which are sending a chilly blast through the property industry.

Reporting a 3% dive in the quarterly net asset value of its portfolio of office blocks, retail parks, superstores and shopping centres such as Sheffield's Meadowhall, chief executive Stephen Hester today said: "There is no doubt that we are in the middle of a price correction. We have been running hard to stand still.

"The combination of interest-rate rises and more recent debt-market turmoil left real-estate pricing vulnerable to the correction that is now under way. The question for us is how long this will go on for and how much of a correction there will be. We do not have the answer for that."

The 3% fall in asset values in the three months to the end of September - which included six weeks of the credit crunch - showed a resilience in office prices, with its City and West End portfolio remaining up 3.6%, against a 2.9% dive in valuations on its mostly non-London retail portfolio.

The overall drop comes against a recent history of booming markets in which British Land's portfolio has soared in value by 60% in the past three years.

Investors in Land's stock have already been fully aware of which way the wind has been blowing for the property companies. Shares in the group have nearly halved since the start of the year. They plumbed new lows today, falling 18½p at 932p.

However, while arch-rival Land Securities is attempting to kick-start shareholder growth by splitting its business into three separately listed property operations, Hester was withering about the plan, saying: "In terms of the shape and size of British Land, I am completely agnostic. But having looked at all the options, we have concluded that British Land is most likely to remain in its current shape with its current strategy.

"We believe that rearranging the deckchairs is a less good way to go forward."