Goldman wary on British Land growth

GOLDMAN Sachs has raised the warning flag over British Land, Britain's second-biggest property company, because of growth fears for its £4.75bn retail portfolio.

In an analysts' note entitled We Do Not Buy the Growth Story, the investment bank dismisses recent bullish comments from Land's new chief executive Stephen Hester about continuing rental growth from its retail assets, 52% of the firm's portfolio.

Goldman bankers write: 'Even if retail sales volumes are growing strongly, retailers are unlikely to be able to afford much higher rents if their margins remain low.'

The latest official High Street sales figures have been grim with retailers suffering their worst Christmas in 23 years as sales fell 1% in December.

Goldman says that it expects 'slowing volume growth, continued price deflation and rising costs (in particular business rate and freight rate) to keep retailers' margins low'. It adds: 'As a result, rental growth for properties may continue to underperform retail sales growth.'

Other larger property companies likely to be affected by the note include shopping centres owner Liberty International and Land Securities, Britain's biggest property firm.

However, all three developers are continuing to expand their UK retail developments. Land Securities and Liberty have teamed up to build a new shopping centre in Cardiff.