Property stock British Land (LSE: BLND) managed to outperform the broader FTSE 100 on Thursday thanks to a positive reception to fresh trading news. While the broader index was down fractionally on the day, British Land rose fractionally to 529p per share.
Today’s increase means the office and retail space provider has risen nearly 46% in value over the past 12 months as the strong economic recovery has boosted sentiment towards the stock.
FTSE 100 firm “delighted” with recent trading
In today’s update British Land chief executive said that “we are delighted with the momentum we are delivering across our business as the economy reopens.” He described leasing activity at the FTSE 100 firm’s London campuses as “strong” and added that “a significant amount of space [is] going under offer to a broad range of occupiers in the last two months.”
British Land also advised that it’s been engaged in £350m worth of “capital activity” of late. It has splashed out £75m to acquire The Peterhouse Technology Park in Cambridge. It has also spent £12m on The Priestley Centre, Guildford and £20m for Finsbury Square Car Park in Central London.
This follows the £82m purchase of Thurrock Shopping Centre, which was announced back in July.
Meanwhile it said that it’s sold off around £160m of non-core assets. These comprise the sale of Virgin Active in Chiswick and the partial sale of Woodfields Retail Park in Bury. The company has also received an offer for the sale of Wardrobe Court, a residential building in the City of London.
A risk too far?
British Land is clearly reaping the rewards of Covid-19 restrictions being rolled back and the UK economy bouncing back. And it is making progress on rejigging its property portfolio to be more effective going forward. This includes taking steps to shrink the size of its retail portfolio in response to the online shopping boom.
That said, as things stand, I’m still not prepared to buy British Land for my Stocks and Shares ISA today. This is not just because of the aforementioned threat that online retailing poses to its shopping centres and other retail assets. It’s also because I fear the possibility of sinking demand for the company’s office spaces as the flexible working phenomenon takes off following the coronavirus crisis.
I don’t think these dangers are reflected in the firm’s share price today. City analysts think British Land will bounce back into the black with earnings per share of 22.5p this year. That compares with the losses of 111.2p per share punched last time out. Yet that still leaves the company trading on a hefty forward price-to-earnings (P/E) ratio of 24 times. This sort of valuation could prompt a hefty share price fall should, as I suspect, trading conditions worsen again. I’d rather buy other blue-chip shares today.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended British Land Co. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.