UBS has moved British Land Company PLC (LON:BLND) from Buy to Neutral, reducing its price target slightly to 440p from 445p. The bank said the share’s upside has narrowed since its November upgrade, prompting a more cautious stance toward the UK property company.
Central to UBS’s decision was a reassessment of office demand over the long term. The analysts flagged the potential implications of artificial intelligence on how firms use office space, and combined this with an unfavourable view of current UK macroeconomic conditions to justify the downgrade.
UBS pointed to a consistent signal coming through a range of office market indicators. Both forward-looking measures and backward-looking data, the bank said, show a slowdown in office-based employment. Specific labour-market observations cited by UBS include a marked weakening in graduate hiring, a faster rise in youth unemployment relative to headline unemployment rates, and additional softening in high-frequency hiring metrics in 2025.
As a result of these trends, UBS reduced its capital growth projections for City and West End properties in the period from 2028 to 2032. That downward revision forms part of the rationale for narrowing expected upside for British Land shares.
Despite these office-sector headwinds, UBS underlined supportive aspects within British Land’s portfolio. Retail parks were singled out as continuing to deliver one of the strongest return profiles across UK property sectors. The bank expects that near-term earnings growth drivers will emerge over the next 24 months through a combination of lease-up activity, cost efficiencies and retail-led like-for-like growth.
UBS also examined British Land’s valuation versus its asset base. The stock, the bank noted, is trading at about a 30% discount to spot EPRA Net Tangible Assets. UBS views that discount as commensurate with its forecast of a negative value-creation spread: an average Return on Invested Capital of 7.3% per annum compared with a Weighted Average Cost of Capital of 9.4%.
Summary
UBS downgraded British Land to Neutral and trimmed its price target to 440p, citing constrained upside driven by concerns over office demand - including potential effects from artificial intelligence - and soft UK labour-market indicators. The bank still sees supportive dynamics from retail parks and expects earnings improvement via lease-up, cost savings and retail-led growth within two years.
Key points
- UBS lowered its rating on British Land from Buy to Neutral and cut the price target to 440p from 445p, citing a narrower upside.
- Analysts raised caution over long-term office demand, highlighting AI-related impacts and a weakening in graduate hiring, rising youth unemployment and softer high-frequency hiring metrics in 2025.
- Retail parks in British Land’s portfolio are viewed as a key supportive element, and UBS expects lease-up, cost efficiencies and retail-led like-for-like growth to drive earnings over the next 24 months.
Risks and uncertainties
- Office demand - Continued deterioration in office-based employment or a larger-than-expected shift away from office occupancy would further pressure City and West End capital growth projections.
- Macroeconomic headwinds - Weak UK macro conditions could impede leasing activity and slow retail-led recovery, affecting earnings growth expectations.
- Valuation gap - A sustained negative value-creation spread, where ROIC remains below the WACC, could justify the current discount to EPRA NTA and limit upside for the stock.