(Reuters) - Derwent London (DLN.L) raised its rent forecast for 2018 on Thursday, as the central London office developer sees strong demand despite Brexit uncertainties plaguing the sector.
Derwent, which has an investment portfolio worth 5 billion pounds, has remained resilient with higher demand from companies in the media and creative space and relatively low exposure to the financial sector.
“There are a lot of acquirers out there looking for space, hopefully we will land some of them ... and they are looking for sizeable space,” Chief Executive Officer John Burns said, adding that companies like Diageo (DGE.L), Deloitte Digital and Bain Capital were seeking out spaces.
The company said it expects 2018 estimated rental value to range between growth of 2 percent to negative 1 percent, an improvement from an earlier forecast of up 2 percent to down 3 percent.
Shares were little changed in weak morning trading on Thursday.
The British property market saw rents fall and vacancy levels rise after Brexit, with concerns that values of London office buildings could drop as potential tenants stay on the sidelines and some financial jobs relocate to continental Europe.
More recently, the market faced added concerns with some retailers and restaurants closing as consumer spending drops in the country. However, Derwent said that retailers and restaurants made up only small part of its business.
“We believe Derwent’s West End and fringe London portfolio remains well placed to deliver long-term gains as its areas benefit from regeneration, transportation investment and supply constraints,” Liberum analysts wrote in a note.
Derwent said it also expects average yields to remain firm in its portfolio in 2018.
New lettings came in at 8.4 million pounds ($10.82 million) in the six months to June 30, 8.2 percent above its estimate in December, the company said.
Derwent said it had further lettings of 3.4 million pounds in the second half with another 2.2 million pounds of rent under offer with good ongoing interest.
The company, which owns and manages an investment portfolio of 5.5 million square feet, said net rental income rose 1.6 percent to 80.6 million pounds, from a year earlier.
Profit before tax, excluding fair value movements and profits on disposals of investment properties, rose 47.4 percent to 74.6 million pounds in the first half.
However, net asset value per share was down marginally at 3,713 pence, due to a small increase in the number of shares.
Reporting by Arathy S Nair in Bengaluru; Editing by Bernard Orr