Derwent London, a FTSE 250 property firm based in the capital, has reported robust demand in its markets, which has resulted in steadily rising rents and a low vacancy rate of around one per cent across the investment portfolio during the third quarter.
The company said that in the year-to-date, central London offices have outperformed the wider UK investment and occupier markets, and that with the ongoing uncertainty in the Eurozone and elsewhere, London remains a preferred investment destination for global investors, who are widening their search from the traditional 'super prime' areas of Mayfair and St James's to a broader area of central London.
During the first nine months of the year, central London office investment totalled £10.4bn, 15% higher than the 2011 annual total.
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The supply levels of new office space in the capital continue to be low, the group warned, but said that, according to Jones Lang LaSalle, occupiers "remain confident" about central London, with a report 23% increase in active demand since the half year, with a 26% increase in the West End.
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During the third quarter the largest transaction was the letting of 47,700 sq ft (4,430m2) of 10-4 Pentonville Road to Ticketmaster, at £45 per sq ft (£484 per m2) on the top floor and £42.50 per sq ft (£457 per m2) on a typical mid-level floor, which generates a total rent of £1.9m per year.
In a statement the company said: "The recent performance of Derwent London's portfolio demonstrates the benefit of active management, apposite properties and solid markets. Vacancy rates in the portfolio remain low as tenants continue to be attracted to the Derwent London brand of space and the strong letting performance that we saw in the first half has continued into the second half, with rents achieved above June 2012 estimated rental value (ERV).
Since the beginning of July the group has let 77,500 sq ft (7,200m2) at an annual rent of £3.1m, 7.4% above 30 June 2012 ERV. Lettings in the year-to-date total £12.0m per annum, at an average premium to December 31st 2011 ERVs of 5.8%.
At September 30th, net debt was reduced to £816.9m from £870.2m three months earlier, bringing the group's overall loan to value ratio down to 30.0%.
Balance sheet gearing also fell from 48.5% at June 30th to 45.4% at the end of September. Capitalised project expenditure for the first nine months of the year totalled £45.1m including £3.6m of capitalised interest.
The share price edged 0.05% lower to 2,028p in the first 90 minutes of trading.
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