Fiscal belt-tightening worries British Land

British Land's net asset value growth slowed sharply in the quarter to the end of June on fresh concerns for the economy and fears that banks may choke a property market revival with tough lending restrictions.

"Risks to the global economy seem to have increased in recent months and we remain alert to the potential impact of the fiscal measures needed to address budget deficits not only in the UK but across Europe," Chris Grigg, its chief executive, said.

British Land, the City's biggest office landlord, posted 2.2 per cent growth in net asset value to 515p a share, down from 15.1 per cent in the previous quarter, as austerity measures and weak lending volumes threaten recovering property values.

Mr Grigg, a former banker, was not surprised by the valuation. He said it should be seen in the context of the speedy recovery so far and may signal a trend of weaker price rises in the short term.

Average UK commercial property values have risen by just 1.8 per cent in the second quarter, after gaining 3.9 per cent in the first three months of 2010, data from Investment Property Databank shows. The value of British Land's portfolio has risen just 1.4 per cent to £8.68bn since March.

Despite caution about the near-term economic outlook, British Land said its overall occupancy rose to 97.8 per cent in the period, reflecting strong London office leasing activity and demand for space in its prime retail real-estate.