UBS downgrades British Land to “neutral” on leasing, EPS concerns

Investing.com -- UBS Global Research has downgraded British Land (LON:BLND) to “neutral” from “buy,” citing downside risks to fiscal 2026 earnings and weaker-than-expected leasing prospects across its development pipeline, in a note dated Thursday. 

Shares of the U.K.-based company were down 1.9% at 05:35 ET (09:35 GMT).

The brokerage also cut its 12-month price target to 410p from 465p, with the stock last trading at 379p.

Analysts at UBS flagged that British Land’s guidance for flat EPS in FY26 does not align with the projected 2.4p (8.5%) of potential accretion from new and completed developments. 

UBS now forecasts EPS of 28p for FY26, below consensus at 28.9p and the company’s own guidance of around 28.5p.

The note points to about £50 million of unleased estimated rental value from FY25 and FY26 completions, equivalent to about 11% of British Land’s gross rental income, as a key risk. 

UBS’s independent leasing analysis challenges the company’s assumption that major assets such as Aldgate Place and Norton Folgate will reach full occupancy by FY26. 

Instead, UBS estimates 81% and 79% occupancy, respectively, based on leasing run rates as of May 2025.

In more challenging locations like Canada Water, UBS expects 38% occupancy compared to British Land’s target of 50%. 

Similarly, the brokerage estimates 40% leasing at 1 Triton Square and Mandela Way, both below management’s expectations. 

These differences drive a £5 million shortfall in gross rental income from developments in UBS’s model, and underpin its EPS downgrade.

UBS also revised down its capital growth outlook, lowering its annual forecast from 2.2% to 1.3%, citing a cooling retail warehouse market. 

The sector, which was a major source of capital gains in FY25, has shown signs of yield softening and declining value momentum into FY26.

While British Land continues to trade at a steep 33% discount to net tangible assets and offers a dividend yield of roughly 6%, UBS raised its cost of equity assumption to 12.2%, reflecting greater perceived risk. 

The new target implies a forward EPS yield of 7.4% for British Land in FY26, still trailing peer Landsec, which UBS continues to rate Buy.

The brokerage said it does not see sufficient upside in British Land shares over the next 12 months, given the gap between leasing expectations and current market dynamics.