Great Portland Estates subsides despite London commercial property confidence

In the 12 months to end-March, the FTSE 250 group's portfolio valuation increased 14.7% after a 3.9% rise in the second half of the year.

Rents were up 9.9%, with office rents up 10.6% and retail by 7.7%, following a slower 2.6% in the final six months.

Chief executive Toby Courtauld said the market-beating portfolio returns were mainly thanks to the group's largest ever development programme and some "outstanding leasing activity" including securing one of the largest ever West End lettings.

So far in the current cycle, Great Portland has delivered eleven projects amounting to just shy of 1m square feet, generating a profit on cost of 56% on development investment of £479m, more than 50% ahead of the last cycle's expenditure.

The current committed programme of eight schemes of a collective 851,200 sq ft mostly focused on the regeneration of the east end of Oxford Street, of which all are due to complete in the next 24 months, is expected to see a profit on cost of 27.1% on development investment of £1.1bn.

Current letting activity remains encouraging, with lettings of £2.6m at 4.2% premium to March 2016 ERV since year end, with a further £8m under offer at 1.2% above ERV.

Courtauld admitted that the London market was being held back by Brexit worries and raised the prospect of yield weakness.

"Global economic and political uncertainties, including the upcoming EU referendum, are affecting broader business confidence and investor appetite," he said. "It is too early to tell what the impact on the London property market will be although an extended political stalemate as the consequences of the referendum result are worked out would be unhelpful."

He added that as rental growth is captured, "we can expect some mild expansion of yields”.

But despite this uncertainty, he said London's commercial property market fundamentals "remain supportive", with a growing economy, an expanding workforce and robust demand for quality office space.

With limited new supply in the capital holding vacancy rates near record lows, management expect to generate 5% rental value growth across the portfolio in the new financial year.

Shares in GPOR were down, although choppily, 1.5% to 784p by 1245 BST on Wednesday.