LONDON-British Land is splashing out euro 1.2 billion ($1.5 billion) to buy Pillar Property, the UK's largest owner and manager of retail parks. The purchase price reflects a 7.5% premium on Pillar's share price.

The deal is British Land's first significant corporate acquisition under its new chief executive, Stephen Hester, who took over from founder John Ritblat in November. The buy also boosts its retail holdings to about euro 14.6 billion ($18.3 billion), from its current euro 3.9-billion ($4.9-billion) portfolio. In addition, it strengthens the company's position in the strongly performing out-of-town--suburban--retail property sector.

But some analysts expressed concern that the deal comes just as the retail sector starts to slow. Hester dismissed these concerns saying that out-of-town retailing has been the fastest-growing sector of the property market in the past five years and was likely to remain so in the next five. "Virtually all of the retailers, including those whose sales are going down, have plans to expand their out-of-town presence," Hester says. "We remain confident that, even if the retail market slows from where it was in the past five years, there will be positive growth and that the place to be will be out-of-town retail warehouses."

Demand for out-of-town shopping space has remained strong, partly as retailers look for lower rents and because of planning restrictions on building new retail parks.