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Derwent London, a prominent FTSE 250 real estate sector, announced solid performance for the first half of the year on Thursday. The company achieved a 1.5% rise in gross rental income, reaching £107.5 million, and saw a 6.5% increase in EPRA earnings per share, which stood at 52.7p.
The company also declared a 2% increase in its dividend, now set at 25p per share.
Despite these positive results, Derwent London (LSE:DLN) reported a pre-tax loss of £27.2 million, though this marked a significant improvement from the £143.1 million loss recorded in the same period in 2023. The company's net asset value per share fell by 2.7% to 3,044p, while the total return for the period was -1%, a notable improvement from the -11.7% seen in the first half of 2023.
In terms of portfolio performance, Derwent London observed a 2% increase in its estimated rental value, the strongest six-month performance since 2016. Although capital values decreased by 1.7%, development values increased by 4.3%. The firm also reported a decrease in its EPRA vacancy rate to 3.2% from 4.0% in December, with a tenant retention and re-letting rate of 86%
During the first half of the year, Derwent London advanced its development projects significantly. Notably, the company received planning approval for the 50 Baker Street project and achieved 84% pre-letting at 25 Baker Street, with rates 14.6% above the appraisal ERV.
Looking ahead, Derwent London has upgraded its estimated rental value (ERV) growth guidance for 2024 to a range of 3% to 6%, reflecting a stabilizing UK economic and political environment. The company expects attractive total returns in the coming years, driven by increasingly appealing office yields.
Paul Williams, Chief Executive Officer, highlighted the strong leasing performance with £8.8 million of new rent agreed in the first half, and open-market lettings exceeding the December 2023 estimated rental value by more than 10%. Year-to-date lettings amount to £10.8 million, with an additional £3.4 million under offer.
Williams noted that London remains a leading global city with significant appeal for both international and domestic businesses. The company’s design-focused and amenity-rich office spaces are in high demand, supported by London’s high-quality transport network. He emphasized that the company’s portfolio, particularly its projects in Marylebone and Fitzrovia, is well-positioned to benefit from the relatively low supply of suitable office space.
Derwent London’s outlook has improved, supported by a stronger UK economic environment and an initial interest rate cut. The company is exploring various opportunities and plans to accelerate its growth, leveraging its strong balance sheet and extensive track record.
The positive performance indicators reflect Derwent London’s robust position and strategic advancements in the commercial property sector.
