Shares in Derwent London rose 4% this morning, after its strong annual results cheered the market.

Derwent saw its adjusted net asset value rise 8% to 1862p in 2007. A first half rise of 13% was pegged backed by a 4% decline in the second half, with the company putting this down to a post-credit crunch rise in yields.

The company produced a property return of 11.2%, compared to the Investment Property Databank Benchmark for the West End of 5.7%. The value of the company’s portfolio rose to £2.7bn, up from £2.5bn in February 2007, but down slightly from the peak of £2.8bn in September.

Economic slowdown

The company said tenant demand was still healthy, and rental values grew 14.6% in 2007. However, chairman Robert Rayne was cautious on the prospects for the West End in the light of the current economic uncertainty.

‘At present, the investment market is experiencing some instability and equilibrium will only return when there is a consistent deal flow which requires the restoration of both confidence and liquidity to the market,’ he said. ‘Currently, demand for space in the West End remains firm for the limited available space.

‘However, in the event of a general economic slowdown, even in this distinctive area, rental growth is likely to be affected.’