The bluechip real estate company said its net asset value rose 3.1 percent to 372 pence a share in its fiscal second quarter, trimming the fall since March to 6.5 percent.

Some 70 percent, or 5.8 billion pounds of its property portfolio has increased in value since June, underlining a remarkable turn in sentiment towards UK real estate after more than two years of plunging prices.

"In charting a course through the worst storm in real estate history, the board has been careful to ensure we use the voyage to prepare British Land for greater achievements," said Chairman Chris Gibson-Smith.

"We have the capacity and willingness to be bold, where necessary, but are mindful that the waves caused by the financial maelstrom of the last two years have not yet settled."

The board has recommended a 6.5 pence second-quarter dividend, matching the first-quarter payout, which was distributed last week.

British Land's portfolio mark-up comes days after benchmark compiler Investment Property Databank said average commercial property values rose 1.9 percent in October, the highest monthly increase in nearly four years.

UK commercial property prices have risen 3.2 percent between September 1 and October 31, IPD said.

These rises come in spite of challenging conditions in property rental markets, as cash strapped businesses look to squeeze operational costs against tough economic headwinds.

Bucking this trend, British Land posted 0.7 percent like-for-like rental income growth and said its portfolio remained 94 percent let.

Last Wednesday, Toby Courtauld, chief executive of London landlord Great Portland Estates said property prices would not experience a sustained recovery until rents improved, which was unlikely before the second half of 2010.

British Land beefed up its investment and business development team with the appointments of Steve Smith, global head of transactions at Axa Real Estate Investment Managers, and Charles Maudsley, co-head of Europe at LaSalle Investment Management earlier this month.

(Reporting by Sinead Cruise; Editing by Andrew Macdonald)