B.Land sees 2009 UK recovery at earliest

By Sinead Cruise and William Kemble-Diaz

LONDON (Reuters) - A recovery in UK commercial property markets is unlikely before 2009 "at the earliest", the CEO of British Land (BLND.L: Quote, Profile, Research, Stock Buzz) said on Wednesday.

Speaking at the Reuters Global Real Estate Summit on Wednesday, Stephen Hester said the speed and intensity of the UK correction had caught some market players by surprise but greater near-term pain shortened the odds for a rapid turnaround.

"If we look back to the early 1990s it took four years for the markets to recover but I very much doubt that it will take that long this time," Hester said, citing the freer flow of capital through latter day global property markets.

"It's now probable that next year would be the earliest time we might see prices move in the right direction," said Hester.

In line with other UK property stocks, British Land has been hit hard by a vicious swing in sentiment against the quoted property sector.

Its shares have broadly halved since the introduction of REIT legislation at the start of 2007 and are about 21 percent down so far in 2008.

The company is the UK's largest commercial property landlord with 18 billion pounds ($35.46 billion) in assets under management. It is also London's biggest office developer with around 2 million square feet of space due for delivery by late 2011.

Hester said financial market turbulence had quickened a downturn in the London office market and undermined the company's medium-term assumptions for tenant demand and rental growth.

"In my view the timing of the office market shifted rather unexpectedly" by about two years, he said.

"I was worried about the timing of the delivery of the Leadenhall Building," Hester said, referring to a skyscraper -- also known locally as the "cheese grater" -- that is in construction and due to complete in the third quarter of 2011.

"But I am now more worried about Ropemaker," he said, referring to another major British Land project in the City of London financial district which is due to complete in the third quarter of next year.

Notwithstanding some analyst estimates of 40,000 redundancies in London's financial sector and its satellite industries, Hester said the City's position as a global business hub was assured and the company had no plans to defer completion of the Leadenhall project.

"I think we have said pretty clearly that we are proceeding with it. You can walk by and see the cranes," Hester said. "But you can never give absolute assurances, all I can do is look at the odds at any one time and look at the balance of economic advantage."

ALLOCATIONS

Around 40 percent of British Land's property portfolio is in the London office market, with the balance invested in UK retail assets and a token 2 percent holding in European assets.  Continued...