Property firm Derwent London this morning reported a dip in net rental income for the year, as the vacancy rate for the London office market doubled during the pandemic.
Gross rental income for the landlord hiked 5.8 per cent last year to £202.9m, up from £191.7m in the same period last year.
However the impact of Covid-related costs and impairments saw net rental income for the firm, which owns properties such as the Tea Building in Shoreditch, fall to £174.3m, down 2.1 per cent from last year.
The company swung to an IFRS loss of £83m, down from profit of £280.6m last year. EPRA earnings were £111.0m or 99.2p per share, down 3.8 per cent from 103.1p in 2019.
Investors remained largely indifferent to the news, with shares falling 0.5 per cent to 3,294p.
It comes as the overall vacancy rate for the London office market doubled to 8.1 per cent during the pandemic, as stay at home orders sparked a mass exodus from the capital.
The City vacancy rate ballooned to 10.8 per cent during the coronavirus crisis, and stands almost double that of the West End at 5.8 per cent.
Derwent said central London office take-up “has been running below previous levels with many businesses adopting a ‘wait and see’ approach until they have a clearer view of the future”.
“At the start of 2020 the outlook for the London office market was positive; the vacancy rate was low, demand was good and the supply pipeline was significantly pre-let,” the group said.
“The pandemic has brought substantial economic contraction with the UK’s GDP falling 9.9 per cent, a hiatus in letting activity and has forced many people to work from home. For the first time in many years, London’s job numbers have fallen.
“The future is still uncertain and some of the final arrangements with the EU undecided, but we are now on a roadmap that should see the London economy start to recover as the year progresses. On this basis we can look forward with some optimism,” Derwent added.
John Burns, who co-founded the property investment and development business in 1984, will step down later this year after 37 years at the helm.
Mark Breuer has been appointed as non-executive director and chairman designate and will take over as chairman in May.
“From its modest beginnings, Derwent London has grown into a leading London office investor, focused on sustainable, high quality and design-led space. This statement is my last after 37 years with the company and I am proud of the team who have risen to the challenges of the last year,” he said.
Burns warned that London has “been severely affected with its retail and entertainment venues closed and most office occupiers working from home.”
“Recovery will take time,” he said, adding that he had “every confidence London will continue to be one of the world’s best cities for living, recreation, education and business”.