(Bloomberg) -- Land Securities Group Plc wrote down the value of its City of London office portfolio by almost 14% last year, dragging the UK commercial real estate landlord to a full year loss. 

The office and retail owner marked down the overall value of its real estate portfolio by 6% last year as the impact of rising interest rates was partially offset by higher rents. The company’s portfolio dropped by £625 million to £9.96 billion ($12.6 billion) in the year through March 31, according to a statement Thursday. The rate of decline slowed in the second half, LandSec said in the statement. 

The writedowns pushed the company to a £341 million loss before tax. LandSec shares fell as much as 1.96% in early trading Friday.  

Higher interest rates have weighed heavily on commercial real estate as buyers demand better returns to compensate for the risks of investing in illiquid assets in the face of higher bond yields. That’s been compounded by structural shifts in working patterns that have weighed particularly heavily on offices, echoing the correction to store values triggered by rising e-commerce that took place over the past decade. 

LandSec’s London office portfolio accounted for £449 million of the portfolio’s total writedown, driven by its City of London holdings, which fell significantly more than the 3.6% decline in its larger West End portfolio. 

The West End has been cushioned by scarce new construction and a rush of companies seeking space in London’s most sought after areas with shops, bars and restaurants that can help lure staff back to the office. By contrast City of London office vacancies have risen since the pandemic as some companies reduce their footprints or seek alternatives in more vibrant parts of the UK capital. 

The landlord’s major retail properties, which are finally emerging from years of falling rents and writedowns, outperformed the office portfolio and registered growth of 0.2% in the second half thanks to higher rents. 

LandSec has been selling off swathes of its larger, fully leased London office portfolio to raise capital and reduce debt. That’s positioned the company to invest in acquisitions and in its development pipeline, which includes a series of projects in London’s Bankside district. 

“After a period of proactive capital recycling, most recently with over £600m of non-core assets sold in the past seven months, we have meaningful capacity to invest in high quality assets that add to our best-in-class portfolio at what we believe to be an attractive point in the cycle,” Chief Executive Officer Mark Allan said in the statement.

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