Land Securities, Britain's largest commercial property company, today admitted its portfolio of shops and offices had fallen in value by £1.28 billion in the sharpest decline since height of the last recession.

The company's entire holding is now worth £14.7 billion. As a result, Land Securities reported that pre-tax profits tumbled from a £1.98 billion gain last year to a £888.8 million loss for the year ended March 31, 2008.

Last year, property prices had risen by to 20 per cent for some new London offices and regional shopping centres. However, prices of retail property and City offices have fallen sharply since last May, when Francis Salway, chief executive at Land Securities called the top of the real estate market.

The company said today that its total retail portfolio had fallen in value from £8 billion last year to £6.85 billion at the end of March.

Mr Salway said: "Short-term, market conditions will be challenging with deteriorating employment levels in the financial services sector. However, we are well positioned to compete in a challenging market and can use our balance sheet strength to take advantage of opportunities."

Mr Salway and Paul Myners, chairman at Land Securities, are in the process of breaking up the company into three separately quoted businesses containing London properties - mostly offices but some large shopping schemes - a retail real estate business and the group's Trillium property outsourcing division.

Mr Salway said demerger was progressing to plan, and confirmed Land Securities had received separate bids for Trillium, valued at about £1.5 billion.

Second round bids for Trillium were received over the weekend. Commenting on the division, Mr Salway said: "We see excellent prospects for continued growth in the short, medium and long-term."

Land Securities revealed today it has already spent £6.9 million on advisory fees for the demerger and it is estimated the total bill will reach £60 million. Citigroup is advising on the demerger while UBS is acting on the Trillium sale. The board has also taken financial advice from Greenhill.

The cost of running three separate boards of directors in the future was today put at about £15 million.

Falling property valuations has increased Land Securities' gearing to 67.5 per cent from 58.8 per cent a year ago which Mr Salway said was "moderate."

The group is sitting on £611 million of committed but undrawn borrowings which can be used for development and buying land from distressed sellers.

Despite falling into the red, Land Securities increased its dividend by 20.8 per cent to 64p. Shares in the company rose 3p to £14.65.

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