Land Securities Group PLC (LSE:LAND) and British Land Company PLC (LSE:BLND) will announce their half year results on 15 and 16 November respectively.
As two of the UK's largest property development and investment groups, investors will wait to see their take on the property market.
After strong valuation gains that boosted yield compressions over the past 18 months, this has reversed over the past quarter, with a likely impact on property portfolios.
Landsec saw £875mln profit before tax in 2022 full-year results back in May, hailing the move from lockdown to growth for its positive results, while British Land saw an underlying profit of £251mln in the same period.
When we last heard from him, British Land CEO Simon Carter said: “We are mindful of current elevated economic and geo-political uncertainties, but our strategic advantage in sectors with pricing power means we can look ahead with confidence.”
Landsec boss, Mark Allan, meanwhile, took confidence from the company’s focus on “central London offices, major retail destinations, and mixed-use urban neighbourhoods,” areas where it has a “genuine competitive advantage”.
But interest rates and the economic outlook have both changed since then.
The recent CBRE monthly index showed capital values down 6.8% across all UK commercial property in October alone.
The rise in interest rates over the past few months "should impact not only asset values but also on the cost of servicing debt for those not fully hedged," said analyst Matthew Saperia at Peel Hunt.
But for British Land, he noted that costs are fully hedged for the current financial year.
"While we anticipate the September portfolio valuation will reflect an overall fall in asset values, it is likely to be a waypoint on the asset re-pricing path and we will be very interested to hear from management on their view on the prospects for asset values," said Saperia of Landsec.
Landsec share fell by 10% to 641p in the past six months, as British Land fell by 15.8% to 411p in the same period.
As a result, British Land's shares sit on a 50% discount to the March 2022 EPRA net tangible assets per share, with LandSec on a 46% discount, according to Peel Hunt's calculations.
Goldman Sachs (NYSE:GS) analysts last month reiterated their ‘sell’ recommendation of Landsec, estimating a 15%-20% correction in UK commercial real estate prices between June 2022- December 2024.