FTSE 250-listed commercial property developer Derwent London PLC (AIM:DLN) published a set of “encouraging interim results” on Wednesday “that confirm both strengthening momentum in the London office occupational market and a progressive stabilising of underlying asset values", said house broker Shore Capital Markets.
Key to the 6.5% increase in earnings per share was an improvement in the West End occupier pictures, where vacancies remain at a healthy 4.5%.
Post-pandemic office yields have progressively softened across the UK, with central London experiencing the lowest investment volumes since 1999, noted Shore Cap.
However, prime yields in the West End have stabilised at approximately 4% for the first time since 2021, driven by expectations of improving ERVs and anticipated interest rate cuts.
“We expect these yields to be attractive to international capital and to see a progressive redeployment given the relative historic value and expectation of rising asset prices,” stated analysts.
For these reasons, “We believe that Derwent London looks to be one of the best-placed operators to benefit from the recovery in West End offices and we like its award-winning, design-led development pipeline north of Oxford St”.
With shares are a 28% discount to forward net asset value, Shore Cap says the stock is a buy at 2,234p.