Derwent London plc
Report and Accounts 2024
Network
W1
Derwent London plc
Strategic report
04
Our strategic framework
06
Our year in review
08
Investment case
10
Chairman’s statement
12
Chief Executive’s statement
15
Central London office market
18
Our portfolio
20
Regeneration projects
24
Strategic framework
& business model
28
Strategic objectives
33
Measuring our performance
38
Our stakeholders
40
Responsibility
42
Double materiality
44
Environmental
48 Social
54
Governance
60
Property review
74
Finance review
86
Going concern & viability
90
Managing risks
Governance
118
Introduction from the Chairman
120
Governance at a glance
122
Board of Directors
124 Executive management
126
Corporate governance statement
132
The Section 172(1) Statement
140
Nominations Committee report
144
Audit Committee report
156
Risk Committee report
166
Responsible Business
Committee report
174
Remuneration Committee report
200
Directors’ report
205
Statement of Directors’
responsibilities
Financial statements
208
Independent Auditors’ report
216
Consolidated income statement
217
Consolidated statement of
comprehensive income
218
Consolidated balance sheet
219
Consolidated statement of
changes in equity
220
Consolidated cash flow statement
221
Notes to the consolidated
financial statements
268 Company balance sheet
269
Company statement of changes
in equity
270
Notes to the Company
financial statements
Other information
277
Ten-year summary
278 EPRA summary
281 Principal properties
283 List of definitions
287 Shareholder information
288 Awards and recognition
Read more
derwentlondon.com
derwentlondon.com/responsibility
We delivered another strong leasing performance in
2024 with new leases signed 12% above ERV, and
activity well distributed across the portfolio.
After declining in H1, portfolio valuations recovered in
the second half and ended the year up 0.2%. Our rental
values grew 4.3% in 2024, the highest since 2016.
London is a leading global city, attracting a diverse
occupier base. As office specialists, the spaces
we deliver have strong appeal. Our well-stocked
regeneration pipeline and high quality central London
portfolio positions us well to benefit from the positive
rental growth outlook for 2025.
Paul Williams
Chief Executive
Report and Accounts 2024
01
Strategic report
Derwent London plc
02
STRATEGIC
REPORT
04
Our strategic framework
06
Our year in review
08
Investment case
10
Chairman’s statement
12
Chief Executive’s statement
15
Central London office market
18
Our portfolio
20
Regeneration projects
24
Strategic framework
& business model
28
Strategic objectives
33
Measuring our performance
38
Our stakeholders
40
Responsibility
42
Double materiality
44 Environmental
48 Social
54
Governance
60
Property review
74
Financial review
86
Going concern & viability
90
Managing risks
DL/28 in Old Street
EC1
Having access to the lounges
adds incredible value for
our staff and organisation.
What’s impressive is the spec,
design and quality. It really
puts Derwent into a different
light and category than most
office providers.
Comic Relief
on the DL/ Lounges
Report and Accounts 2024
03
Strategic report
OUR STRATEGIC FRAMEWORK
We are driven by our
To create long-term value for our stakeholders
Dedicated
and adaptable
A passion
to improve
London’s office
spaces
Strong
customer
focus
Progressive
and pragmatic
‘Open door’
and inclusive
Collaborative
and supportive
Occupiers
Employees
Local
communities
and others
Shareholders
and debt
providers
Central
and local
government
Suppliers
Vision
Culture
We design and curate long-life,
low carbon, intelligent offices
that contribute to London’s
position as a leading global city,
while aiming to deliver above
average long-term returns for
all our stakeholders
We build long-term relationships
We lead by design
We act with integrity
We manage our balanced portfolio
Achieved by our
We craft inspiring and
distinctive space where
people thrive
Purpose
Values
See pages 26 and 27
See pages 38 and 39
Core income
On-site schemes
Potential schemes
Strategic
objectives
Core
activities
Governance
framework
Derwent London plc
04
White Collar Factory
EC1
Report and Accounts 2024
Strategic report
05
OUR YEAR IN REVIEW
Demand for our high quality, well-located product remained strong through 2024,
enabling us to secure £18.9m of new lettings during the year. This includes 25 Baker
Street W1 where the offices are now fully let ahead of completion. Progress continued
on other regeneration projects, notably at 50 Baker Street W1 where we secured
resolution to grant planning consent and acquired the remaining 50% interest from
our JV partner. Property yields stabilised in H2 and ERV growth doubled in the year,
returning the portfolio to capital growth.
Operational highlights
£
18.9
m
Lettings,6.2% above December 2023 ERV
3.1
%
EPRA vacancy rate (December 2023: 4.0%)
R
60
%
Major on-site projects pre-let
50
Baker St
Achieved planning & acquired remaining 50%
for £44.4m (before costs)
ESG highlights
137
kWh/sqm
Energy intensity (2023: 149 kWh/sqm)
R
12,357
tCO
2
e
Operational carbon footprint (2023: 14,370 tCO
2
e)
69.2
%
EPC rating A or B (by ERV) including projects
(2023: 68.4%) – market average < 30%
£
451
k
Community fund & sponsorship donations committed
Portfolio performance
0.2
%
Capital return
(2023: -10.6%)
4.1
%
Total property return
R
(2023: -7.3%)
5.73
%
True equivalent yield
(2023: 5.55%)
4.3
%
ERV growth
(2023: 2.1%)
Derwent London plc
06
Financial highlights
1
EPRA performance measure – see page 283
for definitions.
2
See note 38 on page 255 in the financial
statements for reconciliation to IFRS figures.
3
See note 40 on page 261 in the financial
statements for calculation.
R
Links to remuneration – see pages 33 to 37.
Soho Place
W1
3
,
149
p
EPRA NTA per share
1, 2
(2023: 3,129p)
£
276.9
m
Gross property & other income
(2023: £265.9m)
3.2
%
Total return
R
(2023: -11.7%)
106.5
p
EPRA earnings per share
1, 2
(2023: 102.0p)
£
189.6
m
Net rental income (2023: £186.2m)
80.5
p
Dividend per share (2023: 79.5p)
3.9
x
Interest cover ratio
3
(2023: 4.1x)
29.9
%
EPRA loan-to-value ratio
1, 3
(2023: 27.9%)
Report and Accounts 2024
07
Strategic report
INVESTMENT CASE
Positioned for growth
Our
portfolio
and
people
together
deliver long-term
performance
Market-leading
brand and
experienced
team
• A brand renowned for
design and innovation
• Established team with
a strong track record
of success
• Long-term strategy
with consistent property
outperformance against
our benchmark
See pages 26 and 27
Balanced
portfolio with
extensive
pipeline
• West End focused, where
demand is strong and
rents are rising
• Opportunity-rich
portfolio: 47% with
regeneration potential;
£116m of reversion
• 2m sq ft pipeline of major
regeneration projects
See pages 18 to 21
Strong occupier
demand driving
rental growth
• London is a global city,
attracting a broad range
of sectors
• Quality offices, which are
in short supply, play a
key role in attracting and
retaining talent
• Businesses prioritising an
‘office-centric’ workforce
See pages 15 to 17
Derwent London plc
08
Differentiated
design-led and
amenity-rich
approach
• Matching product to
requirements through
bespoke design
• Broad product range
from larger HQs to
smaller ‘Flex’ units
• Portfolio-wide approach
to amenity made possible
by village clusters
See pages 22 and 23
Responsible
value
creation
• Ensuring value creation for
all stakeholders
• Commitment to net zero
carbon by 2030
• Investing in self-generated
‘green’ electricity
See pages 40 to 53
Disciplined
approach
to capital
management
• Robust balance sheet
with modest leverage
• Financial headroom
provides firepower when
opportunities arise
• Focus on total return
and long-term growth
in dividend, well covered
by earnings
See page 32
Report and Accounts 2024
Strategic report
09
We have a proven track record, with
a disciplined approach to capital
recycling. We have consistently
outperformed the MSCI Central London
Office Index and in 2024 our total
property return was a strong 280bp
outperformance of the index.
The occupational market in London
remains positive. Demand is broadening
and activity is more evenly spread
across sub-markets than in recent years.
While businesses continue to prioritise
prime offices in well-connected, central
locations, there has been an increase in
demand for space at more accessible
price points. Our development pipeline
and portfolio are well-aligned with these
market trends. Our overall ERV was up
£10.9m to £320.5m. This includes the
substantial uplift in our mark-to-market
reversion to £18.3m, from £7.1m at
December 2023, driven by ERV growth.
Over the coming years we intend to
maintain the pace of investment into
our portfolio to ensure our buildings
remain strategically well-placed. Our 2m
sq ft regeneration pipeline will deliver
attractive returns and the scale of the
projects provides good optionality. In
addition, the volume of refurbishments
continues to rise, giving us the
opportunity to drive rents.
Our portfolio remains under continual
review. We will recycle assets to maximise
our return on capital and ensure we
retain sufficient financial headroom
to take advantage of investment
opportunities that are emerging.
Our focus is on offering innovative
workspaces that meet London’s diverse
demand. Like our portfolio, this ranges
from large, long-term HQ spaces to
smaller ‘Furnished + Flexible’ units. We
are dedicated to delivering best-in-class
offices under our distinctive brand and
our unique DL/Member offering plays a
key role in providing real additional value
to our occupiers.
EPRA earnings in 2024 of 106.5p per
share were up 4.4% and I am therefore
pleased to confirm a 0.5p increase in the
final dividend to 55.5p, resulting in a 1.3%
increase in the full year dividend to 80.5p
per share in line with our progressive and
well covered policy. It will be paid on
30 May 2025 to shareholders on the
register of members at 25 April. The 2024
interim and final dividends were covered
1.32 times by EPRA earnings.
CHAIRMAN’S STATEMENT
The Group has a clear and
differentiated business model,
established over 40 years, adding
value through regeneration and
delivering high quality, design-led
sustainable offices.
Mark Breuer
Chairman
Highlights
•
Market conditions increasingly
favourable
•
Long-term track record of total
property return outperformance
against the central London office index
•
A balanced portfolio between core
income properties and those with
regeneration potential
Derwent London plc
10
We dedicate considerable time and
resources to the ongoing development
of our people to prepare for succession
at all levels across the business and the
Nominations Committee continues to
plan for senior succession. We have a
strong pool of talent from which to draw.
During 2024, a number of changes
were made to the Board. Claudia Arney
stepped down after nine years as Non-
Executive Director. She was succeeded as
Chair of the Remuneration Committee
by Sanjeev Sharma.
The Board was pleased to welcome
Rob Wilkinson and Madeleine McDougall
as Non-Executive Directors in the year.
Dame Cilla Snowball will retire by no
later than the 2025 AGM after her
nine-year term and be succeeded by
Madeleine as Chair of the Responsible
Business Committee. The Board thanks
both Claudia and Cilla for their valuable
contribution to the business and wishes
them well for the future.
With our great team, strong portfolio
and more positive market outlook,
we are optimistic for the future.
Mark Breuer
Chairman
Brunel Building
W2
Report and Accounts 2024
11
Strategic report
We are excited about the outlook for
London and the office sector despite the
volatile macroeconomic environment.
The importance of the office is widely
endorsed by companies across sectors,
as they place increasing emphasis on
ensuring their talent is primarily in the
workplace. High quality, well-located
space across a broadening variety of
price points is being prioritised, which
aligns well with our portfolio.
London’s occupational market was strong
in 2024, with take-up in line with longer
term levels and active demand rising
significantly in the year. At the same time,
the vacancy rate for high quality London
offices is very low and the medium-term
development pipeline is constrained. In
2024, we delivered another successful
leasing performance and portfolio ERV
growth more than doubled year on year
to 4.3%, the highest level since 2016. We
expect this positive activity to continue.
The investment market was subdued last
year. Sentiment improved in the first half,
with inflation and long-term interest rates
reducing, optimism leading up to the
General Election and UK GDP forecasts
being revised upwards. However, Q4
saw a reversal in sentiment as concerns
around growth and inflation re-emerged.
In spite of this, and in line with our
guidance, property yields stabilised,
following two years of substantial
outward movement. Investment activity
is expected to increase in 2025, with a rise
in the number of assets being brought to
the market and more investors looking to
invest in the sector.
Our strategic focus
We are specialists in the London market,
with clear insight into how businesses
see London from a global perspective.
The evolving market and occupier
mindset present both challenges and
opportunities. We are well-positioned
to capitalise on these shifts and are
proactively responding to them.
Our commercial decisions around capital
allocation and operational models will
impact returns over several of years.
As such, we focus on the short and
long-term implications of our actions. We
continue to review market opportunities
while remaining committed to capital
recycling (both buying and selling) at the
optimal price and timing, ensuring we
deliver good returns.
CHIEF EXECUTIVE’S STATEMENT
London is a leading global city which
continuously adapts and evolves.
Paul Williams
Chief Executive
Highlights
•
Strong total return outlook
•
ERV growth across market as
occupier demand broadens
•
Substantial increase in
reversionary potential
•
Delivering 0.9m sq ft into
supply-constrained market
London’s enduring appeal
London is a leading global city which
continuously adapts and evolves. With
unrivalled international connectivity and
world-leading universities, it is Europe’s
tech and innovation hub attracting
more venture capital investment than
any other European city. Appealing
to talent across a variety of sectors, it
supports a highly skilled workforce. It is a
city with all the elements for a promising
and strong future: ongoing growth in
office-based jobs, GDP expected to
maintain its outperformance, and an
enduring competitive advantage which
appeals to a broad range of businesses.
Derwent London plc
12
We continuously review the portfolio
to ensure it is fit for the future and
over the last five years have made
disposals totalling £824m. Combined
with acquisitions of £484m and capex of
£848m, our portfolio has been reshaped
to fewer but higher quality buildings. We
have been disciplined and strategically
focused with our capital allocation.
With higher quality, greener buildings
today, this reshaping has helped deliver
a more resilient valuation performance
through the recent downturn. Our total
property return has outperformed the
MSCI benchmark by 170bp pa over the
last 10 years, and by 280bp in 2024.
Operationally, our approach is to reflect
the market and offer spaces that appeal
to a broad range of businesses, without
assuming ‘one size fits all’. Inspiring and
innovative architecture and design,
sustainability, and a holistic approach
to our overall product and offering
are integral to everything we do when
shaping our portfolio.
For larger buildings with bigger floor
plates, we deliver HQ space which
attracts more established businesses on
long leases. For units under 10,000 sq ft,
we will likely offer Furnished and Flexible
units to attract smaller occupiers who
are often willing to pay higher rents for
this more straightforward, short-term
solution. Our focus is on maintaining a
well-balanced mix across the portfolio.
This approach ensures a robust WAULT,
sustainable profit margins and helps
us manage our operational costs.
The unique Derwent London offering,
regardless of scale, is backed by a
personal approach, exceptional service,
and further enhanced by our DL/
Member benefits.
Portfolio activity
In 2024 we achieved further operational
success, signing £18.9m of new leases
and bringing the total rent agreed over
the past two years to £47.3m. Open
market lettings in 2024 averaged 12.3%
ahead of December 2023 ERV and
included the pre-letting of the remaining
office space at 25 Baker Street W1. With
a high rate of retention and reletting,
coupled with commencement of rolling
refurbishment work at several properties,
our EPRA vacancy rate reduced from
4.0% at December 2023 to 3.1%. Since
the year end, a further £1.2m has been
let and £2.2m is under offer.
Soho Place
W1
Our leasing activity was well distributed
across the portfolio. Geographically,
activity was split between the West End
at 53% and City Borders at 43%, with
pre-letting accounting for 47%.
Lease length is an important KPI for us,
with a long WAULT supporting our risk
capacity for speculative development.
Including pre-lets, the average term
(to break) for new leases signed in the
year was 8.0 years, slightly ahead of the
portfolio’s 6.8 year ‘topped up’ WAULT.
We completed disposals totalling £89.1m
(after costs) in the year. At £76.6m,
Turnmill EC1 was the principal disposal,
reflecting a capital value of £1,100 psf
and a 4.9% initial yield. In addition,
the sale of the recently vacated 4 & 10
Pentonville Road N1 completed shortly
after year end for £25.7m.
Capital expenditure for the year totalled
£207m, one of the highest levels on record.
Alongside our two major on-site projects,
the number of rolling refurbishments
increased in the year, as we upgrade
environmental performance and drive
rents. We expect a higher volume of
refurbishment over the coming years.
Marylebone has been proven as a strong
West End office market. This further
justified our acquisition of our JV partner’s
50% stake at 50 Baker Street W1. This
c.240,000 sq ft development is expected
to start in H1 2026. The consideration of
£44.4m (before costs) reflects a valuation
of c.£370 psf on the consented area, an
attractive discount to recent market
evidence. With a forecast shortage of
supply when the development completes,
we expect this project to deliver an
attractive return.
Report and Accounts 2024
13
Strategic report
CHIEF EXECUTIVE’S STATEMENT
continued
Property valuations and
financial performance
Underlying capital values, before
accounting adjustments, increased 0.2%
in 2024, supporting a 0.6% uplift in NTA
to 3,149p per share and a positive total
return (also known as total accounting
return) of 3.2%. This masks a notable
shift through the year, however, with
valuations up 1.9% in H2, more than
offsetting the 1.7% reduction in H1. The
portfolio equivalent yield was unchanged
through H2 at 5.73%, having increased
18bp in the first half. Reversion growth
and development profits were the main
drivers of the second half valuation
performance. Our 4.1% total property
return again outperformed the MSCI
benchmark of 1.3%.
Our higher quality buildings continued to
outperform. Properties valued at ≥£1,500
psf rose in value by 3.5%, while those
valued at ≤£1,000 psf declined 3.8%.
The value of our on-site developments
increased 15.1% reflecting completion
of the pre-letting campaign at 25 Baker
Street and further progress on delivery.
With a structural shortage of space
across the London office market, and
particularly in the West End, that meets
the evolving requirements of occupiers,
we are confident in the ongoing rental
prospects for our portfolio. The pace of
rental value growth in our portfolio more
than doubled in 2024 to 4.3% compared
to 2.1% in 2023. Rental reversion from
reviews and expiries increased substantially
from £7.1m at December 2023 to £18.3m
at the end of 2024 which will drive future
growth in our gross rental income and
marks the start of the new cycle.
Earnings are an important component
of our total return. In recent years, we
have delivered relatively strong EPRA
earnings despite many of our costs
rising more quickly than rental income.
We are now seeing a general reduction
in the rate of cost inflation. It is worth
noting that the lumpy nature of our
development projects causes short-term
movement in earnings as they complete
and capitalisation of interest stops.
Combined with a gradual increase in our
average interest rate as near-term debt
is refinanced, this may impact our EPRA
earnings in 2025. Trading profits from the
sales of the private residential units at
25 Baker Street W1, which are excluded
from the definition of EPRA earnings,
are expected to offset this.
Dynamic London office market
Central London take-up increased each
quarter in 2024 aligning with longer term
levels. A total of 11.3m sq ft was leased.
There is significant pent-up demand
across a wide variety of requirements,
with active demand up 30% over the
year to 12.8m sq ft. London’s office
vacancy rate in 2024 reduced from
8.6% to 7.5%, a decline of c.4m sq ft.
Occupier requirements are focused on
well-connected core locations where
existing supply is low and new supply is
constrained. As a result, businesses with
larger space needs are engaging earlier
to maximise the available options.
We believe the West End is well-
positioned for the medium and longer
term. Reasons include the broad
occupier base and its more restrictive
planning backdrop which limits the
amount of new space being delivered.
While we expect the City to benefit
from a near-term increase in demand,
it is likely to remain more cyclical than
the West End which has historically
demonstrated more sustained growth.
2.0m sq ft regeneration pipeline
Regeneration sits at the heart of our
business model and we have a long
and successful track record of creating
high quality space in the right locations.
Our pipeline extends to approximately
2.0m sq ft across eight major projects,
which includes:
•
on-site projects totalling 437,000
sq ft (completion in 2025); the
combined development yield is
6.1%, which would rise to 6.3% if a
similar level of ERV outperformance
is achieved on the remaining
speculative space. Our new yield
on completion metric, of 6.9% for
these projects, replaces notional
finance costs with actual capitalised
interest and is more in line with the
methodology used by our peers;
•
next phase of projects totalling
481,300 sq ft which are expected to
complete over the next three to four
years; and
•
longer term projects of c.1.1m sq ft.
To maximise value on our longer term
projects such as Old Street Quarter EC1,
we will explore the appropriate balance
of uses, including residential and other
‘living’ sectors.
Additionally, we have an ambitious
programme of refurbishments.
Upgrading the physical space
and improving the environmental
performance (EPC rating) will deliver
attractive rental uplifts at these smaller
projects. Examples include 1-2 Stephen
Street W1, Middlesex House W1 and 1
Oliver’s Yard EC1.
Recognising our employees
In January 2025, we were delighted to
achieve the National Equality Standard
(NES) for the second consecutive
time, achieving a score in the top 5%
of accredited organisations in the UK.
Our continued work to raise the bar
has also been recognised in the latest
Britain’s Most Admired Companies
awards where we came second in the
real estate sector. Acknowledging the
hard work of our talented workforce,
there were 15 internal promotions in
2024, including two promotions to the
Executive Committee: Matt Cook, Head
of Digital Innovation & Technology, and
Julie Schutz, Head of Internal Audit.
Outlook and guidance
The market outlook for London office
rental values is positive with increases
forecast across all sub-markets. Our
valuation ERV growth rose to 4.3% in
2024, and our guidance for 2025 is in the
range of 3% to 6% across our portfolio.
Initially, this will further drive our rental
reversion, with uplifts in passing rent
captured over the following years as
rent reviews and new lettings occur.
We operate a total return business
model. Whilst we expect to see a gradual
increase in our average cost of debt
as we refinance over the next year or
so, ERV-led capital value growth and
development surpluses will be the main
drivers of our performance over the next
couple of years, with earnings expected
to respond thereafter.
Assuming yields remain stable, our total
return outlook is the strongest it has
been for several years, supported by
ongoing investment into the portfolio
in a robust occupier market.
Paul Williams
Chief Executive
Derwent London plc
14
CENTRAL LONDON OFFICE MARKET
Highlights
•
Take-up of 11.3m sq ft in line with
long-term average; substantial
pent-up demand
•
Looming supply shortfall
–
Vacancy rate down 4m sq ft, to
7.5%; Grade A vacancy much
lower at 1.3% in West End
–
Speculative development of
8.4m sq ft over next four years;
<9 months’ supply
•
Investment market subdued in
2024; forecast to improve in 2025
Occupational market
Over the next five years, economic
growth in London is forecast to
outperform the UK by c.40bp annually.
This is expected to support an annual
increase of c.40,000 new office-
based jobs, in turn giving business the
confidence it needs to support ongoing
investment in London.
Occupier demand is strong with a rise
in the number of businesses upsizing.
Recent data from Cushman & Wakefield
showed that for the 10 largest London
office lettings in 2024, there was a
47% average increase in space taken
compared to the existing footprint.
This was corroborated by data from
CBRE which shows the number of
expansions continuing to rise.
Take-up in 2024 was positive and
active occupier demand is elevated
whilst vacancy continues to reduce
and the medium-term development
pipeline is constrained. Consequently,
larger businesses are launching new
requirements at an ever earlier stage.
White Collar Factory
EC1
Report and Accounts 2024
15
Strategic report
London’s office cycle
Capital growth
Rental value growth
Index (1980=100)
0
50
100
150
200
250
300
350
400
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
Central London office yields
West End
City
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
Prime office yield (%)
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Available space by sub-market
West End
City
Docklands
Central London
Vacancy rate (%)
0
2
4
6
8
10
12
14
16
18
2000 2002 2004 2006 2008 2010
2012
2014
2016
2018 2020 2022 2024
Source: MSCI
Source: CBRE
Source: CBRE
Central London office stock
West End
39%
City
33%
Midtown
11%
Docklands
9%
Southbank
8%
Source: CBRE
Overall take-up rose 4% to 11.3m sq ft, in line with the 10-
year average. At 3.5m sq ft, West End take-up reduced 6% as
space under offer rose 11% to 0.9m sq ft. In the City, take-up
increased 3% to 5.8m sq ft, but under offers declined 20% to
0.9m sq ft. Across London, active demand rose 30% to 12.8m
sq ft, the highest level on record, although transactions are
generally taking longer to complete.
Vacancy across London reduced by 4m sq ft to 7.5%, or 1.9%
for Grade A. Within this, the West End remains well-placed
with a Grade A vacancy rate of 1.3% (5.0% overall) with the
City at 2.0% (or 9.5% overall). The cyclical increase in demand
from the banking and finance and business services sectors
has supported a 3m sq ft reduction in City availability to
8.0m sq ft.
Across London, 14.5m sq ft of committed developments are
forecast to complete by 2028, of which 6.1m sq ft is pre-let
or under offer (42%, rising to 51% for 2025 completions) and
8.4m sq ft remains speculative. Based on average take-up
over the last 10 years, this is equivalent to less than nine
months’ supply. 2025 is expected to see a spike in deliveries
(8.8m sq ft), but over the medium-term, the pace of
completions slows significantly.
Looking ahead, the outlook is promising. We are pleased to
observe positive activity throughout London, with rental growth
now anticipated across most sub-markets. The trend toward
quality continues, and competition for the highest quality
spaces is emerging, further bolstering strong rental growth. In
addition, we are witnessing increased demand for good quality
space at more accessible price points. Businesses across all
sectors in London are back in the office, and with corporate
mandates becoming more common, we are seeing a rise in
businesses seeking additional space to accommodate this shift.
CENTRAL LONDON OFFICE MARKET
continued
Derwent London plc
16
Central London office take-up
West End
City
Docklands, Midtown & Southbank
0
2
4
6
8
10
12
14
16
18
20
Take-up (million sq ft)
Central London office investment transactions
Average
Investment transactions (£bn)
0
2
4
6
8
10
12
14
16
18
20
22
2000
2000
2002
2002
2004
2004
2006
2006
2008
2008
2010
2010
2012
2012
2014
2014
2016
2016
2018
2018
2020
2020
2022
2022
2024
2024
Central London development pipeline
Completed
Under construction let/under offer
Under construction available
Vacancy rate
Completed average
0
2
4
4
6
6
8
8
10
10
12
12
Floorspace (million sq ft)
Vacancy rate (%)
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
Source: CBRE
Source: CBRE
Source: CBRE
Investment market
The macroeconomic backdrop remained uncertain in 2024.
The positive sentiment which started to emerge in the middle
part of the year reversed in Q4, with long-term interest rates
rising to their highest level since the global financial crisis in
2008-09. Ongoing uncertainty meant that many investors
remained on the sidelines and potential vendors chose to
hold on to buildings until market conditions improve. This
resulted in the lowest transactional volume recorded across
central London in the last 25 years (£4.9bn vs a long-term
average of c.£11.4bn).
Q4 saw the return of a number of institutional investors to
the central London office market, following recent price
corrections, having not been active for several years. Well-
located assets of up to £150m, with Value-Add and Core-Plus
business plans, continue to attract good investor demand,
principally due to the favourable occupational market and
strong rental growth prospects. However, Knight Frank
now also reports around £5bn of capital for core assets, as
a consequence of the growing perception that pricing has
levelled out.
Demand remained focused on the sub-£100m market, with
an average lot size across central London of c.£33m (against
a long-term average of closer to £80m). There were only 11
deals in excess of £100m. The West End proved more resilient
against the challenging economic backdrop, recording £3.1bn
of transactions or four times that of the City at £0.8bn. This
can partly be attributed to its smaller average lot sizes and
lower reliance on debt, but also its broader investor appeal.
Current investment availability sits at around £4.1bn,
according to CBRE. With more pricing datapoints starting
to emerge and rising demand, it is hoped that the market
will see an increase in stock levels over the course of 2025.
However, with around £20bn of equity targeting London,
CBRE estimates an imbalance between demand and supply.
Prime yields were unchanged in both the West End and City
in 2024 at 4.0% and 5.75%, respectively.
Report and Accounts 2024
17
Strategic report
Marylebone
Paddington
Mayfair
Paddington
Marylebone
Valuation
£
5.0
bn
Floor area
5.4
m sq ft
Tenants
402
Buildings
62
A well-located central London portfolio
Portfolio weighting across our 13 London villages (98%)
West End Central
Fitzrovia
34%
Marylebone
11%
Victoria
8%
Soho/Covent Garden
8%
Paddington
6%
Mayfair
2%
West End Borders & Other
Islington and Camden
5%
Brixton
1%
Contracted rental income
1
£
204.3
m
2023: £206.5m
Weighted average unexpired
lease term (WAULT) – to break
5.9
yrs
2023: 6.5 years
Estimated rental value
2
£
320.5
m
2023: £309.6m
‘Topped-up’ WAULT
– to break
6.8
yrs
2023: 7.4 years
EPRA net initial yield
4.3
%
2023: 4.3%
True equivalent
yield
5.73
%
2023: 5.55%
OUR PORTFOLIO
1
Net of ground rents.
2
After additional capex of £292m.
City Borders
Old Street
11%
Shoreditch & Whitechapel
6%
Clerkenwell
5%
Southbank
1%
Scotland
2%
Derwent London plc
18
Pimlico
Vauxhall
River Thames
River Thames
Tower
Gateway
DLR
Farringdon
Angel
Tottenham
Court Road
Whitechapel
Victoria
Euston
Barbican
Blackfriars
Bond Street
Elephant and Castle
Cannon Street
London
Bridge
Liverpool Street
King’s Cross
St. Pancras
Fenchurch Street
Waterloo
Soho /
Covent Garden
Holborn
Shoreditch
Old Street
Fitzrovia
The City
Victoria
Islington
Clerkenwell
Whitechapel
Southbank
Key
Villages
Properties
Conditional acquisition
Report and Accounts 2024
19
Strategic report