The commercial property owner expects the London office vacancy rate rise due to higher unemployment and business closures, although its lower-rise space, located in the West End and Tech Belt mixed-use locations “will be relatively resilient”.
“Recent events have highlighted the importance of offices for enhancing collaboration, social interaction and wellbeing to build business culture and attract and develop talent,” said chief executive Paul Williams.
“Derwent London‘s design-led and adaptable space will support our occupiers returning to their offices, an essential part of getting London back to full strength.”
Next year, the FTSE 250 developer will start work on a Baker Street building, ready for 2025, while The Featherstone Building is scheduled for delivery in 2022.
Gross rental income rose 5% to £97mln in the six months to June 30, with net tangible assets per share down 1.5% to 3,900p..
Earnings per share dipped 5% to 48.9p after £6.5mln of costs linked to COVID-19.
Analysts at Peel Hunt said the set of results was more robust than expected and are eyeing a 4% increase in net asset value over the full year to 3,790p.
Good litmus test for London
Russ Mould, AJ Bell Investment Director, said: “With its broad spread of tenants between the media industry, professional services, retail head offices and retail and leisure sites Derwent London looks a good litmus test of how the capital’s commercial property landlords are faring during the pandemic and the economic downturn.
“On this evidence, the signs are more encouraging than many would have thought, although with the HM Government as its single-biggest individual tenant the commercial landlord does have one major client who should always be good for paying its bills.
“Other leading tenants include Burberry, Expedia, Publicis, WPP, Ticketmaster and Sony Picture across a portfolio that it split across the West End of London (63%), borders of the City of London (35%). Office space rents look to be holding up well and the weakest areas are, quite understandably, retail and hospitality.”
In a separate announcement, Derwent said Simon Silver, executive director and co-founder, is looking to retire from the board from February 2021. He will continue to support the business as a consultant until December 2022.
Shares slipped 1% to 2,930p on Tuesday.