Interest from investors and signs of better returns from commercial property have helped to stem losses at British Land, the UK's second biggest commercial property company said today.

The owner of office, retail and industrial space reported that total losses shrunk from £572 million in the first quarter of last year to £275 million in the three months to June 2009, despite the continued slide in capital values and deflation in rents.

The value of the group's portfolio fell by 3.7 per cent in the quarter. However, £3 billion worth of assets "either remained steady or increased over the quarter." Income from rent was £143 million, 1.2 per cent up on the previous quarter, but 12 per cent down on the same period last year.

In a sign that the worst is over for the commercial property market, British Land said it had seen evidence that yields were hardening and that a small number of banks were showing increasing willingness to lend to commercial property companies. However, it added that loss of rent from tenants hit by the recession remained a threat to business and said that a number of developments are likely to remain unfinished "until the numbers add up."

Chris Grigg, chief executive of British Land, said: "We don't have plans to press the start button. It is hard to make the numbers add-up on new developments because of rent deflation. As soon as the numbers add up, we'll do it."

British Land stopped short of announcing the part-sale of Broadgate Estate, the 16 office buildings in the City of London that Blackstone, the US private equity group, is understood to be buying for £150 million.

“I said several times that all of our assets are for sale at the right price ... as and when there is anything to disclose, we will do so,” Mr Grigg said.

The development, where UBS is the biggest tenant, comes with about £2 billion of debt. The group also confirmed this morning that it had received inquiries from potential buyers about its unfinished Leadenhall development, also in the City.

Shares in British Land edged up by 1.1p to 497.5p this morning. The company’s stock has risen by over 30 per cent since July, buoyed in recent weeks by speculation that it could be the subject of a £10 billion bid by a consortium including the Mittal steelmaking family and Abu Dhabi's ruling family. British Land said in relation to the rumours that it "had not seen untoward activity of any type."

Mr Grigg, who has been at the helm since January, when he took over from Stephen Hester, now chief executive of Royal Bank of Scotland, said this morning that the group has "sold more assets than anyone over the past three years", but signalled a turnaround towards buying, adding: "We are now focusing on looking at ways to add profitably to the portfolio. Indeed, our investment commitments during the quarter exceeded disposals."

The group has looked at a dozen possible investments in the last three months and bid for two, but lost out to higher offers.

Net debt stood at £4.8 billion, £166 million lower than at the beginning of the quarter. British Land said it does not have any refinancing requirements in the next five years.

The group's retail outlets, let to high street stores such as Tesco, Sainsbury's and Debenhams, have proven more resilient than offices, where banks are the main occupants, with an occupancy rate of 97.6 per cent compared with 87.9 per cent for offices. It said that rental income from retail tenants rose by 3.5 per cent, compared with a 2.2 per cent fall in office rental income. Rent from retail warehouses rose by 7.6 per cent.

Mr Grigg sounded a note of caution on the prospects of an imminent economic recovery.

He said: "We're cheered by the fact that decline has slowed, but don't think that we should get ahead of ourselves.”

British Land said it had agreed to let out about 100,000 sq feet of lettings since the end of June and will continue to pay its quarterly dividend of 6.5p a share.

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