British Land has seen the value of its commercial property portfolio fall by 12.3% due to the rising interest rate environment. 

British Land saw an even bigger write down on its London portfolio, with its City of London properties falling by 15%. In total British Land has a £9bn portfolio of properties.

The company — one of the UK’s largest commercial landlords — said rising interest rates were a “double edged sword” for the group. 

Releasing its annual results the company said: “Higher rates have lowered demand for property and in turn valuations. More positively, higher rates also translate to higher rental values and, given the group’s high portfolio occupancy rates of 96.7%, this has offset some of the value pain.”

However the company said that some of these pressures were now easing. In an interview with the FT, the company’s head Simon Carter sad the value of good quality London offices should stabilise after sharp falls in recent months. But he warned that the outlook was not as optimistic for less desirable buildings. 

These falling valuations saw British Land report a £1bn pre-tax loss, down from a profit of just over £900m the year before. The groups underlying profit — which does not take into account these valuations — rose almost 7 per cent from the year before to £264m. Like-for-like net rental income increased by 6 per cent. 

These results come a day after Land Securities Group, the London-based commercial property developer reported a pre-tax loss of £622m for the year, after more buoyant profits of £875m the year before. Again the company blamed this reversal in fortunes on the reduction in its portfolio value, due to weaker valuation yields and less active investment. 

Looking ahead British Land said it was focusing on investments in retail parks and its urban logistics business in London. This refers to units which are used as hubs for businesses where the stock for fulfilment of online orders is housed. There is often a need for these locations to be convenient geographically for both retailers and consumers who increasingly expect priority or same-day deliveries.