Derwent London forging ahead

Rents on first-half lettings rose 8.6 per cent from the end of December and the company has increased its guidance on estimated rental value growth for the year from 5-7 per cent to 6-8 per cent. Net rental income rose from £58.5m to £63.7m, too. But there's more income ready to be unlocked as half-rent and rent-free periods come to an end. In fact, the gap (or reversionary rate) between contracted rent at £123m and the estimated rental value - the rate that would be charged at current rental levels - grew to £83m.

Chief executive John Burns sees little sign of a let-up in demand, either, with demand for office space, notably from the technology sector, boosted by an expected 60,000 increase in the number of jobs over the next six years. To cater for this Derwent has embarked on a major phase of property development, with 626,000 sq ft currently under construction. A further 975,000 sq ft of schemes have planning consent, with an additional 163,000 sq ft submitted for planning approval.

Mindful of the higher risks associated with a significant development portfolio, nearly one-third of current construction is already pre-let. Furthermore, the completion of an £800m financial restructuring, begun six months ago, has reduced the cost of debt, despite being almost fully hedged against rising rates. The average length of borrowing has been extended to over seven years.

Broker Liberum has upgraded its full-year forecasts and expected adjusted book value of 2,658p a share by the year-end (from 2,264p in 2013).