Derwent London shares gain as strategic partnership and 25 Baker Street milestone signal income momentum

Derwent London PLC (LON: DLN) closed at GBX 1,790.00 on October 21, 2025, marking a 0.96% gain for the day, as the FTSE 250-listed real estate investment trust announced a landmark strategic partnership with Related Argent and confirmed the practical completion of its high-profile 25 Baker Street development. The double-update signals that Derwent London PLC is not only strengthening its income profile but also positioning itself for long-cycle regeneration value creation across central London.

Known for its focus on sustainable, design-led development, Derwent London PLC controls one of the largest commercial property portfolios in London, valued at £5.2 billion as of June 30, 2025. Its business model revolves around acquiring off-market properties at low capital values in improving locations, with redevelopment or refurbishment forming the core strategy. The company’s latest move with Related Argent, combined with solid leasing outcomes at 25 Baker Street, has been interpreted by market participants as a signal of both stability and forward ambition.

What does the Related Argent partnership tell us about Derwent London’s long-term regeneration strategy?

Derwent London PLC announced on October 21, 2025, that it has entered into a strategic partnership with urban regeneration specialist Related Argent for the redevelopment of the Old Street Quarter EC1 site. The 2.5-acre site, which Derwent London PLC expects to acquire by late 2027, is one of the last major undeveloped island plots in central London. It sits in a high-footfall, high-connectivity zone and represents a rare blank slate for a future-focused, mixed-use regeneration scheme.

The scope of the proposed masterplan is expansive. Derwent London PLC stated that the partnership will seek to secure planning consent for a “best-in-class, mixed-use, living-led” campus. Early studies by the company have explored options including residential apartments, co-living accommodations, student housing, modern office spaces, and hotel infrastructure. While the design blueprint is still in its conceptual stage, the flexibility embedded in the structure will allow Derwent London PLC to execute via multiple mechanisms, such as joint ventures, forward funding, or outright plot sales.

What stands out is the deliberate pairing with Related Argent, which brings a deep bench of experience in large-scale, mixed-use masterplanning. Related Argent is best known for transformational developments such as King’s Cross and Brent Cross Town, both of which exemplify sustainable urban placemaking integrated with commercial viability. Derwent London PLC, in turn, is recognized for its emphasis on architectural excellence and community-conscious redevelopment. Together, the firms aim to bring complementary skill sets to a project that could take much of the next decade to realize.

Derwent London PLC Chief Executive Paul Williams remarked that Old Street Quarter presents a unique regeneration opportunity. He noted that as part of a competitive tender process, Related Argent’s credentials in large-scale urban planning made it a natural fit. He expressed confidence that the collaboration would yield a planning approval that unlocks long-term site value.

Tom Goodall, Chief Executive Director of Related Argent, emphasized that both companies share a long-standing commitment to quality and placemaking. He described the partnership as a joint ambition to generate long-term value for London through complex, mixed-use development.

Institutional investors have taken the announcement as a bullish indicator that Derwent London PLC is actively building its landbank and pipeline well ahead of anticipated macro recovery. The stock’s intraday move to GBX 1,790.00 reflected growing confidence in the group’s strategic depth and its ability to orchestrate complex deals in a market where prime central London assets are increasingly scarce.

How does the 25 Baker Street project strengthen Derwent London’s earnings profile and leasing momentum?

Derwent London PLC also confirmed the successful practical completion of its 25 Baker Street W1 development, a flagship project situated within a 10-minute walk of the Bond Street Elizabeth line station. The company revealed that the entire 204,000 sq ft office component and all three retail units are fully pre-let, validating its leasing strategy and underscoring continued demand for modern, ESG-compliant office space in the West End.

The development is expected to deliver a 7.5% yield on completion and an ungeared internal rate of return of 11.3%. These figures are particularly strong in the context of current market conditions, where rising interest rates and tighter planning restrictions have tempered many peers’ project margins. Lease terms at 25 Baker Street are notably long, with an average unexpired lease term of 13.5 years and over 70% of leases locked in for 15 years without a break option.

Annual headline rent for the office space is £21.2 million, agreed at an average 16.5% premium to the appraisal estimated rental value. The three retail units contribute an additional £0.4 million in headline rent. All leases commenced in September, ensuring that the asset will contribute to Derwent London PLC’s 2025 earnings almost immediately.

From a capital recycling perspective, Derwent London PLC also disclosed that contracts worth £115.9 million (excluding transaction costs) have been exchanged for private residential units at the adjacent 100 George Street W1 site. The project, developed in partnership with Native Land, has already completed £94.2 million in sales, with the balance of £21.7 million expected to close in the coming months. Furthermore, an additional £11 million was received from The Portman Estate for the Loxton Walk retail units and Gloucester Place offices.

The release of capital from these sales, combined with the income contribution from 25 Baker Street, has allowed Derwent London PLC to reduce its net debt to EBITDA ratio by approximately 0.6x from June 2025 levels, where it stood at 9.7x. This deleveraging enhances the company’s balance sheet resilience and provides headroom for upcoming investments, including Old Street Quarter and 50 Baker Street.

Beyond financials, the 25 Baker Street project has been flagged for its sustainability credentials. The development achieved an embodied carbon intensity of approximately 600 kgCO2e per square metre, aligning with Greater London Authority benchmarks and Derwent London PLC’s internal 2025 targets. The building is expected to be Derwent’s first to receive a NABERS energy rating and is on track to achieve BREEAM Outstanding certification. This marks a significant milestone in the company’s goal of becoming a net-zero carbon business by 2030.

Paul Williams described the project as a validation of Derwent London PLC’s ability to deliver future-proof buildings that meet evolving occupier needs. He highlighted the combination of pre-letting success, residential sales, and sustainability achievements as central to the firm’s long-term value creation strategy.

How are institutional investors responding to Derwent London’s dual project updates and what does the stock’s recent momentum indicate about sentiment?

Market sentiment following the updates has leaned positive, particularly among long-term institutional holders. Derwent London PLC’s closing share price of GBX 1,790.00 on October 21, 2025, reflected modest yet meaningful investor optimism, with intraday highs reaching GBX 1,798.00 before settling at the offer price. Analysts have noted that the tightly held bid–offer spread, at 1,790.00/1,791.00, signals strong market support at current valuation levels.

Sentiment has been buoyed by Derwent London PLC’s consistent delivery on execution milestones, from leasing performance to strategic landbanking. Several institutions have pointed to the 100% pre-let status at 25 Baker Street as particularly impressive in an environment where secondary office vacancy remains elevated. The successful capital recovery from residential units further supports the company’s case for disciplined capital allocation and strategic timing.

With Derwent London PLC’s inclusion in the FTSE 250 Index, its liquidity profile remains attractive to mid-cap property fund managers, especially those seeking exposure to prime central London real estate with robust ESG integration. However, some cautious tones remain in the backdrop. Analysts continue to flag macroeconomic headwinds, including Bank of England rate policy and planning delays across London boroughs, as potential constraints on the velocity of pipeline execution.

What lies ahead for Derwent London as it builds its next cluster of income-generating assets?

Looking forward, the successful completion of 25 Baker Street sets the stage for the adjacent 50 Baker Street redevelopment, which Derwent London PLC has indicated will be a critical piece of its next commercial cluster in the W1 corridor. The sequencing of project timelines allows the company to maximize lease-up periods and smooth income generation, while sustaining momentum in earnings delivery.

The Old Street Quarter partnership with Related Argent is likely to be the next major catalyst. While the acquisition is still two years away, early planning work and stakeholder consultations could lay the groundwork for a mid-decade planning submission. Analysts expect any planning consent, particularly one that secures substantial residential density or mixed-use flexibility, to be NAV-accretive and potentially unlock value over the 2027–2030 horizon.

With a strong balance sheet, high occupancy, and a curated pipeline of regeneration assets, Derwent London PLC remains one of the few real estate investment trusts able to straddle both yield protection and long-cycle growth. Its performance over the next 12–18 months will hinge on leasing execution at new projects, progress on sustainability targets, and the ability to activate landbanked assets in line with market demand.

What are the investor and project takeaways from Derwent London’s partnership and 25 Baker Street completion that readers should know?

• Derwent London PLC has formed a strategic partnership with Related Argent to masterplan the Old Street Quarter EC1 site, signalling a long-horizon landbanking and placemaking strategy ahead of an expected late‑2027 acquisition.
• The Old Street Quarter masterplanning will appraise residential, co‑living, student accommodation, office and hotel uses with flexible delivery options including joint ventures, forward funding and plot sales.
• The practical completion of 25 Baker Street W1 delivered a 7.5% yield on completion and an ungeared IRR of 11.3%, with the entire 204,000 sq ft office element and three retail units fully pre‑let.
• Annual headline office rent at 25 Baker Street is £21.2 million, agreed at an average 16.5% premium to the appraisal ERV, and lease lengths average 13.5 years with more than 70% on 15‑year no‑break terms.
• Residential contracts totalling £115.9 million at 100 George Street W1 (before transaction costs) have been exchanged, of which £94.2 million has completed and £21.7 million remains to close, improving near‑term cash flow.
• Proceeds from sales and the income stream from 25 Baker Street reduce net debt/EBITDA by roughly 0.6x versus June 2025 levels, enhancing Derwent London PLC’s balance sheet flexibility for future projects.
• The 25 Baker Street scheme meets key sustainability milestones — embodied carbon intensity of c.600 kgCO2e/sqm, NABERS rating in progress and BREEAM Outstanding expected — aligning with Derwent London PLC’s net‑zero carbon by 2030 commitment.
• Market reaction was positive yet measured: Derwent London PLC shares traded up to GBX 1,798.00 intraday and closed at GBX 1,790.00 on October 21, 2025, reflecting investor appetite for prime, ESG‑aligned central London assets despite wider macro risks.
• Key near‑term catalysts to watch are planning progress and JV/Funding announcements for Old Street Quarter, leasing and delivery timelines for 50 Baker Street, and continued residential sale closings and capitalization of proceeds.