London, May 23 (Reuters): British Land Co today agreed to buy Pillar Property for ?811 million ($1.5 billion) to boost its position in the strongly performing retail property sector.

British Land, Britain’s largest property investment company by assets, said it was paying 855 pence a share in cash for the country’s biggest retail park manager, 7.5 per cent above Pillar's closing price on the day before bid talks were unveiled and 9.6 per cent above Pillar’s fully diluted net asset value.

Pillar owns around ?1.3 billion of property assets and manages out-of-town retail parks valued at about ?2.7 billion.

Despite signs of a slowdown in the broader retail sector, demand for out-of-town shopping space has remained strong, partly as retailers look for lower rents and also because of planning restrictions on building new retail parks.

“British Land believes that retail warehousing continues to be an attractive asset class and British Land expects demand to continue to grow, while restrictions on planning consents are expected to limit further supply,” it said in a statement.

Following the deal, British Land will own or manage more than ?10 billion worth of retail assets.

Britain’s commercial property sector has undergone a wave of consolidation in recent years as prices have soared and yields (rent as a proportion of capital value) have fallen.