Derwent London (LON:DLN) used its 2025 full-year results presentation to highlight what management described as a “solid year of execution,” marked by record asset management activity, continued leasing outperformance versus estimated rental values (ERVs), and an acceleration in planned capital recycling. The company also pointed to an improving London investment market backdrop and said it has raised its 2026 portfolio ERV growth guidance to +4% to +7%.
Portfolio positioning and market view
Chief Executive Paul Williams said the group’s portfolio is “strategically positioned,” with 75% in the West End and 81% within a 10-minute walk of Liverpool Street station. Management emphasized embedded rental reversion potential and an approach built on flexibility across headquarters offices and a growing flex offering.
Capital recycling and capital allocation priorities
Management said it intends to accelerate disposals and redeploy proceeds into higher-return uses. Emily said the company plans to dispose of up to GBP 1 billion over the next three years, focused “primarily on mature assets” or those with lower prospective returns. She said capital allocation will be governed by maintaining a strong balance sheet and keeping net debt to EBITDA below 9.5x, while considering options including selective developments, acquisitions, and potential share buybacks.
In 2025, the company completed GBP 216 million of disposals. Management said 2026 had started strongly, with GBP 140 million exchanged since the start of the year (including a Whitfield Street sale announced the morning of the presentation), and a further amount under offer, described as broadly in line with December book values. Emily added that the group had exchanged contracts for GBP 145 million of disposals so far in 2026, with additional assets under offer and in discussions.
During Q&A, management clarified that the GBP 1 billion target includes disposals already exchanged in 2026 and is “not a cap,” with the pace and total potentially influenced by market conditions and pricing.
Leasing, asset management, and flex strategy
Derwent said leasing performance remained resilient in 2025 despite low vacancy. Management reported GBP 11.3 million of new leases signed in 2025 at rents about 10% above ERV. For 2026 to date, the company said it had completed GBP 1.5 million of new leases, was under offer on GBP 14.4 million (including all office space at Network W1), and had GBP 4.4 million in negotiations.
The company also highlighted a record year for asset management: transactions across GBP 59 million of income. Emily said rent reviews totaling GBP 37.4 million were secured at more than 77% above previous rents, while renewals and re-gears were used to extend income and mitigate void and future CapEx risks.
On flexible workspace, Emily said headquarters offices remain the core business, with flex delivered “at proportionate levels aligned to market demand.” Management expects flex to grow to around 10% to 15% of the portfolio from roughly 8%, largely through converting smaller units returning to the portfolio rather than “going out shopping” for additional stock.
Developments, earnings outlook, and 2025 financial highlights
Damian (finance) said two major projects—Network and 25 Baker Street—are essentially complete. He said 25 Baker Street provides annualized rent on a net effective basis of about GBP 18 million (or GBP 22 million headline), while Network’s annualized rent based on year-end ERV is expected to be about GBP 11 million net effective (or GBP 13.7 million headline), with rental income expected to commence around mid-year 2026.
Emily added that 25 Baker Street completed in August 2025 with offices 100% pre-let at 16.5% above appraisal ERV, generating headline rent of GBP 21.7 million and an ungeared IRR of 11.3%. For Network W1, she said offices are fully under offer and practical completion was expected within a week, with financial details to be confirmed after leases transact.
Looking forward, management highlighted a West End-focused pipeline. Schemes include Holden House and the refurbishment of Middlesex House (both already on site), with Greencoat and Gordon House and 50 Baker Street due to start later in 2026. The company also outlined longer-dated optionality on alternative uses, including an aparthotel consent at Blue Star House, a living-led mixed-use vision at Old Street Quarter (with Related Argent in a development management capacity), and residential-led potential at 230 Blackfriars Road.
On earnings, Damian said refinancing is complete for now and that the average interest rate rose in June 2025 but is expected to be largely stable through to 2031. He also said admin expenses fell in 2025 and the group is targeting further cost savings.
The company expects 2026 rental income from 25 Baker Street and Network to be about GBP 18 million higher than 2025. However, earnings are expected to be affected by disposals (management modeled GBP 400 million of disposals in 2026), project-related short-term earnings dilution on West End works, and additional voids at Page Street and 50 Baker Street.
- 2026 earnings guidance: about GBP 0.42–GBP 0.44 per share in H1 and GBP 0.52 in H2; overall 3%–5% lower than 2025, but up 10% versus H2 2025.
- 2027 outlook: EPRA earnings expected to rise 5%–10% versus 2025 (about 15% above 2026).
- By 2030: management models indicate at least 25%–30% earnings uplift as rental reversion is captured and income flows from completed projects (including Holden House and 50 Baker Street).
For 2025, the company reported Net Tangible Assets of GBP 32.25 per share and a 5% Total Accounting Return. EPRA earnings were impacted by lower surrender premiums and higher finance costs following refinancing; the dividend was increased again by 1.2%, marking the 18th consecutive year of increased ordinary dividends, according to management.
Q&A: AI risk, buybacks, and leadership transition
Asked about potential AI-driven office demand or covenant impacts, management said it was not seeing negative effects reflected in valuations to date, while emphasizing close engagement with occupiers and continued attention to covenant risk. On buybacks, the company said it would evaluate the option as disposals progress and capital becomes available; management added that the 2030 guidance does not include any potential share repurchases.
The company also confirmed Paul Williams’ intention to retire after 38 years at Derwent, saying a successor process is underway. Williams said he was optimistic about 2026 and beyond, citing improving market fundamentals, stronger leasing inquiry levels, and increased investor interest.
About Derwent London (LON:DLN)
Derwent London plc owns 66 buildings in a commercial real estate portfolio predominantly in central London valued at £4.9 billion as at 31 December 2023, making it the largest London office-focused real estate investment trust (REIT). Our experienced team has a long track record of creating value throughout the property cycle by regenerating our buildings via development or refurbishment, effective asset management and capital recycling. We typically acquire central London properties off-market with low capital values and modest rents in improving locations, most of which are either in the West End or the Tech Belt.
