Great Portland warns rents in London may fall further

The property company Great Portland Estates yesterday warned that rents in London's key financial and commercial districts were likely to fall further as the economic slowdown forced tenants to give up space.

"Across the sub-markets in which we operate, office rents remain under some pressure with supply outstripping demand, particularly as occupiers look to dispose of surplus space," Great Portland's chairman, Richard Peskin, told the company's annual meeting.

But he said it was not all bad news, because while the London office market was in a downturn and likely to continue falling, central London's medium term prospects were still "fundamentally healthy".

In addition Mr Peskin said that "good" retail space rents in London's West End, home to technology and media groups and theatres, were on the rise. The company has also put in place a new management team, including a new property director, Robert Noel, to set out its strategy.

Great Portland's shares fell 0.5p to 225.5p, giving the company a market capitalisation of £464m. Its shares have underperformed the property sector by about 13 per cent in the last 12 months.

The shares, while down, are trading at a relatively narrow discount to assets – a key performance gauge for property companies – said Alan Patterson, a property analyst at HSBC. Speculation that the company is an attractive takeover target is probably keeping its share price from falling much further, he said.

When it announced its annual results on 6 June, Great Portland said it saw signs of a pick-up in tenant demand. But it also said that the value of its portfolio had dropped nearly 9 per cent from last year, falling below analysts' expectations.