UK property equities

Real Estate Capital UK commentary

After a bullish April, the UK REIT sector’s share prices flat-lined in May, while the wider stock market  drifted down by 1.9%. Land Securities reported better-than-expected results, with an IPD-busting 8.4% rise for its portfolio value in the year to the end of March. British Land’s 6.9% value growth also beat  the IPD, but by comparison to LandSec appeared disappointing.

Both companies benefitted from central London office rental growth and investors anticipate that the lack of new building in  the past two years will generate healthy development surpluses. Derwent London’s £175m, five-year convertible bond issue was oversubscribed. The bonds will pay a 2.75% coupon and convert at a premium of 30%. The proceeds will fund developments.

Local Shopping REIT’s half-year results showed vacancy rates edging down and gross rents up £8.1m through new purchases and rent reviews. IPD’s All-Property Index showed 0.7% total returns in May, with o.1% capital growth.  The strong central London office market helped offices outperform, a 0.2% rise in rental values boosting capital values by 0.4%.