Derwent: Return to office mandates boost London landlord
Ongoing high demand for central London offices, combined with low supply of best-in-class space, has boosted real estate investment trust (REIT) Derwent in the first quarter of the year.
Derwent said leasing activity in the year to date totalled £2.7m, with a further £3.7m of rent under offer.
Open market lettings ticked up by 2.7 per cent from the end of last year, and the company’s vacancy rate was just 3.4 per cent.
Derwent owns 62 buildings – primarily in central London – in a commercial real estate portfolio valued at £5.0bn.
The company, which is the largest London office-focused REIT, has pre-let all 204,300 sq ft of office space at its 25 Baker Street W1 development at an average rent of £104 per sq ft, it said.
The average rent is a 16.5 per cent premium to the appraisal estimated market value, setting a “new benchmark for the area”, Derwent said.
Overall investment volumes in the central London office market more than doubled to £2.4bn year on year in the first quarter, according to CBRE.
It has been the strongest start to a year since 2022, with the increasingly strong return-to-office mandate bolstering activity across the world.
“The central London office market continues to see strong occupational demand against an ongoing backdrop of low supply. Larger occupiers are planning further ahead than ever before as the medium-term pipeline is squeezed,” Paul Williams, chief executive of Derwent London, said.
“We have a high quality portfolio with an attractive average lease term and a substantial development pipeline, which positions us strongly for current and future markets,” Williams added.
Derwent has three West End projects in its pipeline, totalling 0.5m sq ft, as well as major refurbishment works at three more properties.
The company has forecast the rental value of its portfolio to rise by three to six per cent in 2025.