Central London office rents steadily rebounding

Derwent London, a leading property developer in the heart of London, has reported a significant increase in rental income, marking a positive start to the year. This uptick in revenue comes amidst a recovering London office market, which has been on the mend since the end of last year.

The company's robust performance is expected to continue, with plans to commence two major projects - 50 Baker Street and Greencoat & Gordon House - in early 2026. Derwent is already hard at work on its next West End project, Holden House.

Paul Williams, Chief Executive of Derwent London, expressed optimism about the company's future, stating that the total accounting return outlook is the strongest it has been for several years. This optimism is grounded in Derwent's well-positioned balance sheet, ready for reinvestment into developments.

Derwent estimates a rental yield growth of three per cent to six per cent for the full year. This growth is driven by a combination of factors, including falling interest rates, a return to the office, and changing energy requirements that necessitate businesses to upgrade their office spaces to comply with green regulations.

The demand for high-quality office spaces in prime locations like London remains strong, with stable vacancy rates. While the overall vacancy rate in London was about 7.2% as of mid-2025, top-quality Grade A vacancy rates remain low in both the West End (1.4%) and the City (2%).

The supply of the "right space" is constrained due to businesses focusing on high-quality, well-designed buildings with best-in-class amenity and sustainability credentials. This focus on premium properties has created a significant supply shortage at the top end of the London office market, making it a competitive landscape for top firms seeking best-in-class office space.

Derwent is optimizing its portfolio through ongoing strategic asset recycling. The company's total property return in the first half of the year stands at 3.1%, outperforming the MSCI Central London Office Index rate of 1.9%. Derwent has also completed £13.8m of leasing, renewals, and regears in the year to date.

Prime rents in London's office market have risen by 10% in the last year, underscoring the market's resilience and potential for continued growth. With Derwent's strategic moves and the favourable market conditions, the company is well-positioned to capitalise on these trends and continue its success in the London office market.