(Bloomberg) -- A surge of new restaurant, shop and bar openings helped push rents in London’s tourist hot spots higher last year, boosting landlord Shaftesbury Capital Plc, which owns a sprawling portfolio from Covent Garden to Chinatown. 

The landlord signed 526 new leases at higher than expected rents, lifting its income by 10.4%, according to a statement Thursday. That included 68 new retail and hospitality brands and concepts making their debut in the firm’s properties. 

The rising rents helped offset the impact of higher interest rates, meaning the value of the company’s portfolio dipped just 0.8% to £4.8 billion ($6.1 billion), a much smaller hit than that reported by warehouse and office landlords Segro Plc and Derwent London Plc earlier this week. 

Retail property values plunged in the second half of the last decade as the rise of ecommerce led to falling rents and store closures. But that’s left owners less exposed to the sharp hike in interest rates unleashed by central banks over the past two years — and there are now signs rents are starting to rise again as retailers jostle for the best space. 

“The West End has bounced back,” Shaftesbury Capital Chief Executive Officer Ian Hawksworth said in an interview Thursday. “We have 430 restaurant units in our portfolio and all of them are full.”  

Shoppers return

Mall landlord Hammerson Plc provided further evidence that UK retail rents are finally improving when it reported like-for-like income up 6% for 2023, according to a separate statement Thursday. The owner of Birmingham’s Bullring shopping center signed a slew of new deals at rents that were 37% higher than tenants were paying previously and 12% above its valuers’ estimates. 

Both Shaftesbury and Hammerson also reported rising footfall as more consumers came back to physical stores, boosted by the gradual return of office workers to city centers.

Hammerson, which has been selling assets to deal with a debt pile that had become ominous in the face of collapsing retail property values, slashed its net debt by 23% and has brought its loan-to-value ratio down to 34% from 39% a year earlier. It’s also been slashing costs, which are down by almost a quarter since 2020.

Its portfolio is now valued at £4.7 billion, down from £5.1 billion last year, with the reduction mainly due to disposals. The landlord has now completed its plan to sell £500 million of property in 2022 and 2023, including its exit from a redevelopment project in Croydon with Unibail-Rodamco-Westfield, and the disposal of the Italie Deux mall in Paris. 

“We have continued to strengthen the balance sheet,” Chief Executive Officer Rita-Rose Gagne said in an interview Thursday. “That has brought us to focus on our core city center portfolio where we see high demand.”

Shaftesbury Capital, which was formed from the merger of Shaftesbury and Capital & Counties a year ago, is about two-thirds of the way through its plan to sell £250 million of non-core assets following the tie-up. The £150 million of sales it has achieved so far were at a premium of about 8% to their valuation, underlining investor demand for property in the West End, Hawksworth added. 

(Updates with Shaftesbury and Hammerson CEO interviews from fifth paragraph.)

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