Derwent London plans 1 million ft2 of development under construction next year
Derwent London has said it could have 1 million ft2 under construction in 2016, from Paddington in the west to Silicon Roundabout in the east.
Reporting half year results for 2015, the firm confirmed its development pipeline, saying it expected to start on site at 80 Charlotte Street W1 (pictured) and Brunel Building, Paddington W2 in the second half of 2015 having already commenced work at The Copyright Building, 30 Berners Street W1 and the White Collar Factory, EC1.
Derwent London added that it had secured two long-term projects in 20 Farringdon Road and Aldgate Union E1 on which it expects to complete the purchase of in December.
Construction costs continued to “escalate”, the firm cautioned, and have therefore increased their estimates of development capital expenditure. In some instances, where premiums have become excessive, the have also moved away from fixed price contracts.
Derwent London said they believed construction cost inflation would remain high for at least the next two years, at around 10% per annum, but that so far “rising rents and falling yields have ensured our profit margins have at least been maintained”.
Planning was granted in June at 40 Blackfriars Road SE1 for a 68,200 sq ft hotel and a 41,800 sq ft office development the firm said, adding that they “are in discussions about de-risking the project, but a number of hurdles still need to be crossed”.
The 192-room hotel will be operated by the Hoxton group and features conference space and a skybar. The new building will be over a third larger than the previous office consent for the site.
The company has also agreed with Crossrail to acquire a new 150-year lease of 1 Oxford Street W1 for £55m, where it has secured planning consent for 204,000 sq ft of offices, 37,000 sq ft of retail and a 34,000 sq ft 350-seat theatre. Crossrail is to receive a ground rent equivalent to 5% of the rent of the commercial space and 16% of any development profit. Work on the site the firm said could begin in 2018.
The firm reported a pre-tax profit of £405m up 9% from £371.4m for the first half of 2014 and said that its central London portfolio stood at £4.6bn at 30 June 2015. It also in July a new £75m five-year unsecured revolving bank facility.
John Burns, chief executive, said the firm remained “confident” and expected property yields to remain firm in the second half “supported by voracious demand”.