UPDATE 2-British Land's Q1 value growth plunges, shares fall

* Books 2.2 pct NAV growth in Q1, from 15.1 pct growth in Q4

* Maintains quarterly dividend at 6.5 pence

* Occupancy rises despite shaky economy

* Shares tumble 3.15 percent

(Adds share reaction, CEO quotes and analyst comment)

By Sinead Cruise

LONDON, Aug 4 (Reuters) - British Land's (BLND.L) net asset value growth slowed sharply in the quarter to the end of June on fresh concerns for the UK economy and fears banks may choke a property market revival with tough lending restrictions.

"Risks to the global economy seem to have increased in recent months and we remain alert to the potential impact of the fiscal measures needed to address budget deficits not only in the UK but across Europe," Chief Executive Chris Grigg said.

The biggest office landlord in the City of London posted 2.2 percent growth in net asset value to 515 pence a share, down from 15.1 percent in the previous quarter, as austerity measures and weak lending volumes threaten recovering property values.

Grigg, a former banker with career spells at Goldman Sachs and Barclays, was not surprised by the valuation, saying it should be seen in the context of the speedy recovery so far and may signal a trend of weaker price rises in the short term.

"Could they move more or less along these levels for a while? Yes they could. That is perfectly feasible," Grigg said.

"There are some advantages to that slight bumpiness because it is more, rather than less, likely in those situations that we will be able to find some bargains," he added.

British Land shares were trading 3.15 percent down at 454.6 pence by 0934 GMT, lagging a 1.4 percent fall in the FTSE 100 .FTSE index.

"We see a risk that this will result in some profit taking today given the recent bounce in property stocks," JPMorgan property analyst Harm Meijer said. "However, any significant retreat should be viewed as a buying opportunity in our view, because of British Land's 12.5 years (average) lease length."

Average UK commercial property values have risen by just 1.8 percent in the second quarter, after gaining 3.9 percent in the first three months of 2010, data from Investment Property Databank shows. [ID:nLDE66D1KG]

The value of British Land's portfolio has risen just 1.4 percent to 8.68 billion pounds ($13.43 billion) since March.

LENDING FAMINE

CEO Grigg said access to finance remained tight for all but Britain's elite property companies, which could play on strong corporate covenants to secure development debt from lenders.

A pan-European health check of the banking sector on June 23 showed lenders had largely rehabilitated their battered balance sheets, triggering calls for the largest banks to extend fickle credit lines to property buyers. [ID:nLDE66O078]

Several of Europe's largest banks, including HSBC, BNP Paribas, Societe Generale and Lloyds, booked forecast-beating earnings this week after losses from bad corporate and consumer debts fell. However, signs of an uptick in commercial mortgage lending remain scarce. [ID:nLDE6730DO] [ID:nLDE66S0QL]

Despite caution about the near-term economic outlook, British Land said its overall occupancy increased to 97.8 percent in the period, reflecting strong London office leasing activity and demand for space in its prime retail real estate.

Grigg said the company was still in talks with potential partners for its planned skyscraper development The Leadenhall Building popularly known as "the Cheesegrater" in the City of London, where tenant demand for prime offices remains buoyant.

He was less optimistic about the broader retail property outlook.

"The retail environment will continue to be tough, there is no real doubt in our minds that will be the case for the simple reason that growth in consumer spending looks pretty muted right now," he said. (Editing by Chris Vellacott and Karen Foster) ($1=.6465 Pound) (See www.reutersrealestate.com for the global service for real estate professionals from Reuters)