100 Liverpool Street. It's great to be able to share with you such a strong set of financials today. In terms of running order, we'll follow the normal format. Bhavesh will take you through our financial performance, Darren will come back with an operational update, and I'll wrap up with progress on strategy and the outlook for our key markets. Before we do any of that, I just wanted to share some of the highlights. It's a year ago today that we set out a new strategy for the business, a strategy that was designed to play to our competitive strengths in development and active management across our campuses, retail parks, and London urban logistics, and I'm really delighted with the progress we've made. We're on-site with 1.7 million sq ft of campus development.
We've made GBP 1.2 billion of disposals, recycling into our retail parks, and a GBP 1.3 billion urban logistics development pipeline with much higher- return prospects. This progress, together with our strong operational performance, is reflected in our numbers. Values are up 7%, driving a total accounting return of 15%. Our experience over the last 12 months gives us even greater conviction in our strategy. COVID has been a catalyst for businesses to reevaluate what they want from their workspace. Their conclusion, better space. Better space that allows them to collaborate, innovate, and be more productive. This is increasing demand for prime, which remains in very short supply, especially as the development pipeline is being pushed out. Our unique campus proposition capitalizes on this market dynamic. That's why we've had our busiest leasing period in 10 years.
Retail parks have emerged as the preferred format for many retailers due to the affordability of space and their suitability for multi-channel retail. As we forecast a year ago, rents have stabilized, and this is driving strong yield compression with values up over 20%. In urban logistics, demand goes from strength to strength, propelled by e-commerce and same-day delivery. Yet there's a chronic shortage of space. This is a great opportunity for us to use our edge in London planning and complex development to deliver new space via repurposing assets and intensification. All this is against a backdrop where investors are increasing their allocations to real estate as they rotate out of bonds. More on this later, but now I'll hand over to Bhavesh who will take you through the financials. Over to you, Bhavesh.
Thank you, Simon. Good morning, and thank you for joining us. I'll start with an overview of our financial results for the year to March, followed by an outline of how we think about returns and our framework for capital allocation to enable delivery of our strategy. We've delivered a very strong performance with impressive results across all our key metrics. Underlying profit was GBP 251 million, up 25%. Primarily, this is driven by rent collection now back to normalized levels and significantly reducing the impact of provisions for rental debtors. Net tangible asset value increased 12.2% to GBP 7.27 per share. The key movement was an increase in our portfolio valuation of 6.8%. Darren will explain how our strategic focus on campus developments, retail parks, and urban logistics is driving this.
With the dividend paid in the year, we delivered a total accounting return of 14.8%. Our active approach to capital recycling has further strengthened our financial position. Post our year-end, pro forma LTV falls to 28.4% following our announced sale of a 75% interest in Paddington Central to GIC. We will pay a final dividend in July of 11.6 pence per share, with a total dividend for the year of 21.92 pence per share. Our headline net rental income is up GBP 62 million, or 17% in the year. As you can see on the left-hand side, the key driver of net rental income growth is materially lower provisions for debtors and tenant incentives, which contributed GBP 91 million to net rents versus last year. This reflects our strong progress on rent collection.
As a result of continuous engagement with our customers over the last two years, collection rates are nearing pre-pandemic levels. We've now collected 97% of FY 2022 rents, and for the March quarter, collection rates are already at 96%. Further detail is disclosed in the appendices. Our rental income was also impacted by active capital recycling in line with our strategy. Over the last 24 months, we've successfully disposed of GBP 2.4 billion of assets, reinvesting the proceeds into our value accretive development pipeline and returns-focused acquisitions. We can already see the benefit of our recent acquisitions with a GBP 28 million increase to net rents. The GBP 8 million decrease from developments reflects Euston Tower moving into vacant possession ahead of redevelopment.
Looking forward, our committed pipeline will deliver a further GBP 60 million of rents once fully let. The impact of CVAs and admins was GBP 8 million. This largely relates to the full- year impact of various retail CVAs that occurred during the middle of 2020. Overall, like for like, net rents are flat. However, last year included GBP 3 million of surrender premia. We're pleased with the underlying health of our business, which you can see when we disaggregate the moving parts within like for like net rents. Through our active approach to asset management, we've delivered like for like net rental growth across our strategic focus areas. On campuses, like for like growth was up 2.5% or GBP 4 million. This was due to our significant letting activity, including Monzo at Broadwalk House, Braze at Exchange House, and strong leasing across our Storey flexible offer.
We've also seen like-for-like growth across our retail parks, up 6% or GBP 3 million. This is due to significant leasing in the period. Over the year, retail park occupancy has increased 270 basis points to 97.4%. For shopping centers, like-for-like net rents declined by 6%, reflecting deals rebasing to market levels. Albeit, we are starting to see signs of stabilization in values and an improving outlook. Darren will cover shortly key leasing activity across our segments. Turning now to our income statement. Our rental income growth helped increase profits to GBP 251 million, up 25%. Administrative expenses were GBP 89 million in the period.
The increase from the prior year reflects a non-cash accelerated depreciation of IT assets, investment in our people and capabilities, and higher- variable pay reflective of the strong performance in the year. Cost control is something we are and will continue to be focused on, and it's important to note that our new Canada Water and Paddington joint ventures will earn additional fee income, partially offsetting the cost base and will be reflected in the next financial year. Net finance costs were marginally down at GBP 102 million due to financing activity, which I will detail later on. Underlying earnings per share is 27.4 pence, up 45.7%, which results in a dividend of 21.92 pence per share. As usual, we've included a guidance slide in the appendices, including specific detail on the impact of the new Paddington joint venture.
Turning now to our balance sheet. The 12.2% increase in NTA was primarily due to significant property revaluations, as well as the impact of profits in excess of dividends paid. Our focus is on driving total returns, and when including the interim dividend, we have delivered a total accounting return of 14.8% in the year. The significant progress we've made against our strategy has driven this return's performance. I've laid out the key components on this slide. 2.1% is attributable to active asset management across our campuses, which includes our leasing activity across our newly refurbished buildings and our recently completed buildings at 100 Liverpool Street and 1 Triton Square. 1.8% relates to the progress we've made on developments, achieving a GBP 37 million uplift at 1 Broadgate after successfully pre-letting all of the office space.
5.7% from the value play in retail parks, where we identified the opportunity last year, subsequently deployed incremental capital, and have now benefited from significant yield compression in the year. Finally, 1.4% from capital recycling, where we crystallized value in Canada Water through our new 50/50 joint venture with AustralianSuper and benefited from a significant uplift in our retained investment. We see active capital recycling as an important way to drive returns over the medium term. Since April 2021, we've sold GBP 1.2 billion of assets, crystallizing value and releasing capital that we can then recycle into higher return and growth opportunities, which we expect will deliver IRRs of around 10%-15%. That's balanced by our standing investments, where returns and risk are typically lower.
Overall, we target the total property return of our portfolio to be around 7%-8% through the cycle. Around 50% of this will be income, with the rest roughly split between capital uplift on the standing portfolio and development profits from our pipeline. Breaking each component down, this reflects a roughly 4% yielding portfolio where we are today. We've been successful in delivering development profits, generating nearly GBP 2 billion over the last 10 years. Looking ahead across our full development pipeline, we have a further GBP 2 billion of potential profit to come. Simon will talk more on this later. This leaves around 2% of annual capital uplift on our standing investment, which we believe is achievable, particularly in the current inflationary environment.
With our business being focused on total returns, I thought it would be helpful to lay out our financial framework for our returns targets going forward. Overall, our ambition is to deliver total accounting returns of around 8%-10% through the cycle. As I set out on the previous slide, this will be delivered through a total property return of around 7%-8% from our portfolio. We expect admin costs net of the fee income we generate from joint ventures to equate to 0.5%-0.7%. We will continue to maintain a strong balance sheet and keep our LTV in the 30s, with the impact of leverage net of finance costs adding a further 1.5%-2% to returns.
Overall, this should deliver a total accounting return of around 8%-10% across the cycle. On this slide, I've outlined four considerations we think about when making decisions on how we allocate capital to deliver our strategy. We own a truly unique and extensive development pipeline. This covers over 11 million sq ft of value or creative opportunities spanning over the near and medium term. Beyond our development pipeline, we also look for asset acquisition opportunities with strong fundamentals, where we can utilize our capabilities in planning, complex development, and repositioning. This is exactly what you've seen us do this year, amassing an urban logistics development pipeline of GBP 1.3 billion. The strength of our balance sheet is one of our key competitive advantages, and provide capacity to invest...
Sorry, our debt facilities are flexible and provide capacity to invest in our development pipeline and act quickly when opportunities arise. The final pillar is shareholder distributions. Our dividend policy of 80% of underlying EPS provides clarity and strategic flexibility and underpins our capital allocation framework. We aim to invest first and foremost in our own business in both development and acquisition opportunities. We always consider capital returns as an option available to us. As you all know, cost inflation has rapidly accelerated in the past few months, and forecasting inflation is difficult with the elevated macro uncertainty. We remain very attentive to these headwinds, and I wanna spend a moment on how we are thinking about inflation in our business. Our internal view is that construction cost inflation will be around 8%-10% this year.
This is due to key commodity inputs in construction, such as steel, cement, and labor. Looking further ahead, we expect commodity prices to remain elevated, albeit the rate of increase will ease, and we expect capacity in the construction industry to expand as some development projects are deferred or canceled. We expect construction cost inflation will moderate to around 4%-5% over the next 12-18 months. For our committed pipeline, we have fixed around 91% of our cost, protecting us from near-term inflationary headwinds. For our near-term campus developments, all of which are central London-based, higher land values mean that returns from London development are more insulated from cost inflation. Looking across our pipeline for our near-term campus developments, taking into account our view of construction cost inflation going forward, we anticipate IRRs of around 10%-12%.
If construction costs were to exceed our current view, an additional 5% increase in costs would only need an additional 3% increase in rents to hold returns at our base case, which we think is achievable across our best-in-class development pipeline. I'd like to touch on progress we made on our pathway to being net zero. Over the year, we've completed 29 net zero audits across the portfolio conducted by third-party consultants. As we said last November, the cost to retrofit the portfolio equates to around GBP 100 million spread across the 8-year period to 2030. Of this, around two-thirds will be funded through the service charge or by occupiers directly. In addition, we now have detailed asset level plans for the works that are needed.
These are typically low-cost interventions which deliver improvements in energy efficiency, and in the context of rising energy prices, they become more and more attractive. The payback period is very short, typically only a few years, and Darren's gonna bring this to life shortly with a few examples. The strength of our debt metrics is a key competitive advantage. Our balance sheet has benefited from our disciplined approach to capital recycling. As a result, following our 75% sale of Paddington Central, our LTV decreases to 28.4% on a pro forma basis. Our weighted average interest rate is 2.9% in line with last March. We have a balanced approach to interest rate management. Following the Paddington sale, our debt is 79% hedged over the next five years.
For the coming year, we are fully hedged through our use of interest rate swaps and caps. The strike rates on our caps are set at levels which help limit the P&L impact for further rate rises. In summary, we've delivered a great set of results driven by delivering against our strategy, significant property valuation uplifts, and our progress on rent collection. We have a clear and ambitious target for future returns underpinned by a disciplined and rigorous capital allocation framework. We have a strong financial position that enables future growth by progressing developments and acquiring new opportunities, but it also gives us the resilience to navigate through an uncertain macro environment. I'll now hand over to Darren, who will provide an operations and market update.
Good morning, everyone. I'm gonna give you an update on valuations, leasing activity, and some insights in how we're seeing the markets. Let me start with valuations. This year, our portfolio delivered an uplift of 6.8%. Campuses are up by 5.4%, driven by yield shift of 11 basis points. ERVs are shown as flat here, but there was a change in valuation treatment of two buildings at Regents Place as a result of the Meta deal. If you adjust for that, underlying ERVs in our office space were up by 1.5%. Canada Water is up by 18%, reflecting progress on phase one and of course the new joint venture. Retail and fulfillment is up by 10%. That's been driven by an exceptional performance in retail parks, which are up by 21%.
In fact, 13 of our 34 parks saw increases of over 30%. We've seen some ERV decline overall, but the rents on mid-sized parks have now stabilized with over 10 of our parks seeing ERV increases in the second half. Shopping centers are down 6%. ERVs have reduced and yields have expanded, but in both cases, the rate of change is decelerating. Urban logistics is up by 5.4%, excluding the impact of purchase costs. We've seen ERV growth of 6.3%, reflecting the continued strength of logistics within the M25. As a result of these valuation movements and our recent capital markets activity, including the recent Paddington sale, on this slide, we've set out what our portfolio looks like today. Campuses are 64% of the portfolio, which includes our 8.6 million sq ft of committed and pipeline developments.
Retail and fulfillment is a third of the portfolio, of which retail parks now represent 67%. Urban logistics is 3% as at today, but the pipeline we've assembled has a gross development value of GBP 1.3 billion. That's equivalent to over 12% of the group. Now, this has been a great year for campus leasing. At 1.7 million sq ft, volumes are our highest for 10 years, representing GBP 67 million of rent. Pricing's also been strong. On average, these deals were done at 5.4% ahead of ERV. We continue to make great leasing progress on our developments, where we're de-risking our pipeline and achieving higher than target rental levels. At our most recent completion here at 100 Liverpool Street, we've now let the last remaining floor.
At One Broadgate, we're already fully let or under option four years ahead of PC. Next up is Norton Folgate, where I'm pleased to say we are under offer on at least 100,000 sq ft, which represents a third of the scheme. We're already having encouraging initial conversations at Canada Water and 2FA. We think this volume of activity demonstrates the increasing gravitational pull towards our campuses and everything they offer our customers, which has only been highlighted by COVID. We represent 2.5% of London's stock, and yet our activity represents 15% of total Central London leasing volume. Let me walk you through some of the key leasing activity to give you some detail. Here at Broadgate, number one is now fully let, as I mentioned, but there's been activity right across the campus.
We've completed deals with Braze at Exchange House, Maven Securities at 155 Bishopsgate, and Hudson River Trading at 100 Liverpool Street, to name a few. We've also had great success adding to our F&B offer with all nine new F&B units on track to be let by the autumn, with some exciting new names, including Revolve, where world-class chefs take residents for allocated periods of time. At Regents Place, we continue to see activity which establishes the campus as a true innovation hub. Meta has doubled their footprint to 635,000 sq ft, having previously upsized with us on multiple separate occasions. We've brought in new innovation businesses like Babylon Health and FabricNano, who will operate lab space, something we'll look to do more of.
Finally, at Paddington, continuing the themes of innovation and long-term relationships, we've upsized Vertex Pharmaceuticals for the third time across two buildings. Looking at the wider market, take-up's been increasing back towards normal levels. While overall vacancy now stands at circa 8%, over 70% of that continues to be older secondary space. Prime availability is much lower at under 4%, and the undersupply of new quality space is set to become even more pronounced, which Simon will cover in a moment. Now, quality is a very general term that encompasses a range of factors. I just want to pick out one aspect which is increasingly important, and that's floor plate size. Smaller floor plates dominate the availability metrics, and it's where occupiers have a very attractive alternative in the form of serviced or flex solutions.
However, flex operators themselves prefer to work with larger floor plates as these are more economic to subdivide and operate. Assuming historic take-up norms, it would take 2.5 years to clear the market of older, smaller floor plates, compared to only 10 months for new 20,000 sq ft floor plates. Those historic norms don't reflect changing customer preferences. As you can see, the BL portfolio compares very favorably on this basis, with only 5% of our space less than 10,000 sq ft. Turning to Storey, our flexible workspace offer, this is an essential part of our campus proposition, helping us to attract growing businesses to our space, with larger customers also valuing the meeting room and conference facilities we provide. Storey's had a very strong year, with nearly 190,000 sq ft of space let during the period.
Here at 100 Liverpool Street, we're now fully let on all 43,000 sq ft, having launched only a year ago. We've already pre-let the 23,000 sq ft of space we're launching at 155 Bishopsgate. As a result, occupancy is up to nearly 90%. Another key competitive strength is the delivery of sustainable space. As you've heard from Bhavesh, we've already conducted net zero audits across all our major assets, where we've worked alongside external consultants, and have already started work on identified interventions we can make across the portfolio to deliver on our net zero targets. Today, 70% of our portfolio is A to C rated, as opposed to the 55% we reported in September. This is principally due to recertifications based upon our most recent activity.
Our plans go far beyond the requirements of EPC ratings, which we see as a minimum. We thought it'd be helpful to give you some clarity on what exactly these plans look like. Taking an office building as an example, on the slide you can see Exchange House at Broadgate. This is a building where our retrofitting plans are already well- advanced. The total cost of the plan for this building is GBP two and a half million, less than 1% of the building's value, with the key items being heat pumps and LED lights, which isn't unusual for an office building. Our 2030 target is to reduce operational energy by 25%. At Exchange House, we've pretty much achieved that already through interventions to date, and we're close to a B rating.
Our modeling suggests that when all of the work is done, it will deliver a 50% reduction in operational energy, well beyond our target. We would expect broadly two-thirds of the cost to be funded through the service charge or the occupier directly. That's because replacement costs for central building facilities, like boilers, is a standard service charge item, so the incremental cost over what would have been done anyway is very limited. Furthermore, our occupiers will be responsible for costs within their own demise. For example, LED lighting, which is a relatively straightforward upgrade. All this makes financial sense for our customers with a payback period of around 5 years, and that's before we apply any increase in energy prices, and it also aligns with their own net zero targets. Turning to retail and fulfillment.
As with offices, this has been an incredibly strong year, with leasing volumes the highest in 10 years, and overall 2.8% ahead of previous ERV, taking occupancy to 96.3%. Retail parks account for 60% of deal volume, and we're on average 5.9% ahead of March ERV. This has driven occupancy on parks to 97.4%, up 270 basis points over the year. As you can see, they're also outperforming on footfall and sales. For our shopping centers, the lower- footfall is made up by basket size, so overall we're pretty much back to pre-pandemic levels, and at the moment we're seeing no sign of a slowdown. In April, for example, sales in our parks were 4% ahead of pre-pandemic levels.
For retail parks, we've seen some very strong performance over the year, and the fundamentals here remain compelling. Affordability metrics are very, very positive, with OCRs of around 10%. In fact, based upon ERVs, this drops to under 8% and again to 7% post the upcoming rate revaluation. We're seeing continued good demand from more online resilient businesses like Aldi and Lidl, and discounters like Primark and B&M. In fact, we also estimate that around half our existing customers are looking to expand, with another 40% happy with their current footprint. We believe this focus on efficient, affordable space on parks will only strengthen in a more inflationary environment, and the supply dynamics are favorable also. It's worth remembering that parks account for less than 10% of the UK retail market, and on the ground there's typically fewer units than in a shopping center.
As the largest owner and operator in the UK, we've got the scale and expertise to leverage these demand supply fundamentals. Turning to shopping centers, here we think we're approaching an inflection point. Yields were relatively flat in the second half, following years of expansion. With ERVs, ERV declines moderating, we're even executing some deals ahead of ERV now. At the same time, investor interest is picking up, so for the best centers, like Meadowhall, we think we could see yield compression driving attractive medium-term returns. In the meantime, our plan here is to drive value through intensive asset management, improving occupancy, stabilizing cash flows, just as we did on retail parks. Finally, let me turn to urban logistics. The market fundamentals here remain highly compelling for well-located logistics schemes within the M25, which is our core strategic focus.
In London, demand for same or next-day delivery is growing rapidly, with real pressure for more centrally located facilities. Supply of this type of space is incredibly tight. Vacancy in the Southeast is just 1.5%, with only 38 million sq ft of available space compared to an annual take-up of 8 million sq ft. In London, these dynamics are particularly acute. This supply shortage is what's underpinned the rental growth we've seen in the period and looks set to continue for a number of years, with forecast average in excess of 5% per annum. To wrap up, operationally, this is our strongest year in a decade. That's because we're in the right parts of the market. Campuses, where the focus is on quality, retail parks, which are affordable, and urban logistics in London, which is underpinned by very strong demand supply fundamentals.
Thank you, and now I'll hand you back over to Simon.
Thanks, Darren. Before I look at our strategic progress, I just want to take a step back and talk about how international investors are increasing allocations to real estate as they rotate out of bonds. This rotation reflects concern that capital invested in bonds will be eroded by rising inflation and interest rates. Real estate is seen as a much better inflation hedge, and investors are targeting the UK and London in particular.
As real estate becomes more operationally demanding, these big investors want to co-invest alongside world-class partners. We're a partner of choice, as you can see from our recent capital activity at Paddington and Canada Water. Investors want exposure to sub-markets with the kind of pricing power and affordable rents we have across our campuses, retail parks and London urban logistics. That's why investor demand is ahead of the 5-year average in each of our chosen areas. As you heard from Darren, in London offices, there is a strong gravitational pull to the best space, which is in shortest supply. Rents feel very affordable at current levels at around 10% of salary cost. This dynamic is reflected in the strong leasing at our campuses, 5.4% ahead of ERV. A growing number of retailers prefer retail parks because rents are affordable.
This is key given pressure on retailer margins. Consumers are now switching to the types of value retailers found on our parks as they face higher living costs. However, parks represent just 10% of the UK retail market and our vacancy's low at 2.6%. This has enabled us to lease space 5.9% ahead of ERV. I probably don't need to say much about pricing power in urban logistics, but it's worth touching on affordability. Even though rents have grown rapidly, and they'll continue to do so, they actually remain very affordable at around 6% of total distribution costs. As fuel costs rise, it's easy to see why operators will pay a premium for the best located and most efficient facilities.
The strategy I set out last May highlighted how we drive returns by focusing on growth and value opportunities where we leverage our competitive strengths to deliver places both our customers and investors prefer. Strong investor demand for the places we create enables us to recycle capital at premium pricing into higher returning opportunities. We can deliver sustained outperformance by combining this approach with our diversified model, which allows us to hunt where the best returns can be found. Let me demonstrate how we have created value over the last 12 months with a few examples, starting with innovation campuses. You heard from Darren how well our campuses are performing. This is not just because we own the right real estate. Our active management and development capabilities are equally important. The campus proposition requires the successful combination of skills across placemaking, facilities management, leasing and refurbishing space.
This is why the likes of GIC and AustralianSuper choose to partner with us. Turning to development, we have attractive opportunities across all our campuses. One Broadgate and Two Finsbury Avenue here at Broadgate, Euston Tower at Regent's Place in the Knowledge Quarter, and Five Kingdom Street at Paddington, and of course, there's Canada Water. These will all be net zero carbon developments and embodied carbon on them is around 630 kg of CO2 per sq m. That's ahead of our glide path to our 2030 target of 500. We're forecasting IRRs of 10%-12% across the committed program of 1.7 million sq ft, with GBP 250 million of profit to come. There is then our 7 million sq ft pipeline, where we're expecting similar IRRs and profit of around GBP 1.3 billion.
A key driver of this profit will be Canada Water. Here, we're delighted to have a new JV with AustralianSuper, which enables us to accelerate delivery, increase returns, and mitigate risk. This will be one of the most sustainable schemes in London. We're targeting BREEAM outstanding on all the office buildings, and our plans include 12 acres of new open space. We're forecasting development returns in the low- teens. For British Land, these returns will be enhanced via asset management and development management fees. We also have scope to earn additional performance fees. As you heard from Bhavesh, our strong relationship with contractors and the fact that we maintained development momentum throughout COVID means we were able to lock in costs early on our committed program. Others are finding it more challenging to place build contracts and as a result are pushing schemes back.
This together with that gravitation to prime increases our confidence in the rents and returns we will deliver. This is British Land's competitive advantage at play. As you know, we believe knowledge and innovation businesses will be key drivers of the UK economy. Our campus model is well- suited to facilitate the growth of these businesses. You only have to look at the examples Darren gave. Meta at Regent's Place, Vertex at Paddington. In Oxford and Cambridge, knowledge-based businesses are really struggling to find space, which is driving strong rental growth. We're therefore sourcing development-led opportunities in these markets, where our track record and those capabilities make us an attractive partner for many landowners. We're pleased with our acquisition of the Arm headquarters on the Peterhouse Technology Park, where there's significant reversionary potential and longer-term development upside.
Similarly, we've acquired 2 buildings on the Surrey Research Park, which leads on satellite technology and gaming. We're underway with the refurbishment of the first building, the Priestley Centre, where we're delivering lab-enabled space. A key part of our business model is to recycle out of more mature assets in order to crystallize the returns we've delivered with development and asset management skills. We're delighted to extend our successful relationship with GIC by forming a second JV with them at Paddington. The repositioning and development we've delivered at Paddington over the last 7 years has generated an attractive return of 9% per annum unlevered. We're selling down 75% of the majority of the assets to GIC, have joint control, and will earn attractive development and asset management fees. We also retain at least 50% of Kingdom Street, Five Kingdom Street, where there is development upside.
Turning now to retail parks. Here, we identified the value opportunity early, expecting rents to stabilize and yields to compress. We invested GBP 400 million and have delivered a stellar performance with values up 21%. As the largest owner and operator of retail parks, we have a distinct advantage when it comes to assessing the trading performance of potential acquisitions. In addition, we're often able to line up lettings ahead of completing on deals. As you heard from Darren, we've driven occupancy up 270 basis points over the last 12 months. In this regard, portfolio deals have been really important, and that's a clear benefit of our scale, expertise, and relationships. As you know, the last element of our strategy is urban logistics development in London.
Here, we're creating new space by repurposing assets such as the Finsbury Square car park or the Thurrock Shopping Park, and we're intensifying by delivering multi-story in places like Wembley and Enfield. The strategy really plays to our strengths in London planning and delivering complex developments. We're also using our leading position in sustainability to maximize energy efficiency, reduce vehicle movements, and provide infrastructure for electric vehicles. In the last 12 months, we've sourced an urban logistics pipeline with an end development value of GBP 1.3 billion, and attractive returns of around 15% per annum. We assumed rental growth of around 5% a year in our underwrites. Encouragingly, market rents have already reached these levels on most of our schemes. We're also assuming exit yields of around 4% compared to sub-3% today.
Since we set out our strategy, we've made great progress, and we continue to maintain this momentum. This slide sets out what you should expect next. Increasing our scale in the Golden Triangle, further pre-lets, progressing the development pipeline, sourcing and advancing urban logistics opportunities, and delivering on our net zero pathway. Of course, we'll also continue to actively recycle capital. Turning to the outlook across our markets. We're very conscious there's greater macroeconomic and geopolitical uncertainty than at the start of the year. This makes forecasting more difficult. It's clear that inflation is elevated and will remain so for longer than previously expected. This is causing investors to allocate more capital to real estate, which is positive for the subsectors with pricing power. In this vein, we expect our campuses to continue to outperform as demand gravitates to quality and the development pipeline is delayed.
We think rental growth of around 1%-3% feels right, and there is scope for some further yield compression. At our retail parks, we expect rents to be stable overall, with potential for growth across smaller schemes. Given more international investors are targeting this space, further yield compression is likely. In urban logistics, we anticipate rental growth of around 5% or more, given the chronic shortage of space, together with stable yields. That's an attractive backdrop for delivering new space via infill development. In summary, we've delivered a strong financial and operational performance and made good progress on strategy. We're focused on attractive sectors with pricing power and affordable rents, and we're well-placed to deliver sustained outperformance given our first-class capabilities, attractive development pipeline, and active recycling of capital. Thank you for your time.
Bhavesh and Darren are gonna join me on the stage, and we're very happy to take any questions. To start with, we will go to the floor, then we will take any questions that have come in over the webcast and then to the lines. Are there any questions on the floor? I think we've got a microphone, and we, if you could just give your name, which firm you're from, Rob, that would be great.
Thanks, Simon. Yes, Rob Jones from BNP Paribas Exane. 3 questions from my side. Just on the committed pipeline, you said GBP 60 billion of income to come from there. Is that the incremental income versus the income from the assets in their previous guise, or is that cumulative or total income just from those from that committed pipeline? Secondly, you say construction costs to moderate 4%-5% over the next 18 months. I think that's quite positive. Why is that your view? Then thirdly, in terms of your EPRA cost ratio, could you just remind us what it was as at the full- year and whether you have a medium-term target? I presume it's still above pre-pandemic levels at the moment.
Sure. No, thank you for those, Rob. I will endeavor to answer the first question there. The GBP 60 million of income is the total income from those buildings, but don't forget Canada Water, we're developing effectively the first phase on bare land today, so that's all accretive, and also the leases have run down on the other properties, like One Broadgate. Norton Folgate was a new scheme for us as well. I think, Bhavesh, if you want to pick up on the 4%-5% and the EPRA cost ratio.
Yeah. When we think about inflation, we look at sort of the granular inputs regularly, so steel, labor, timber, those things. We try to look at what are the components of what drive construction of a building and try to look at some of the lead metrics on where inflation trends are headed. As I said in my prepared remarks, we think that some supply will come out of the marketplace, so we'll ease some pressure and then prices will moderate. That's something we continue to look at because we are looking forward and taking our best educated view. EPRA cost ratio is around 26%. That will come down next year.
As I said in my remarks, our cost ratio this year is driven by the one-off accelerated depreciation of IT assets, around GBP 3 million. We've got the first full- year of lease depreciation at York House, so we now lease that space, which is our head office. We've also reflected variable pay, reflective of the company performance in the year. We have good cost discipline in the business. This is the first year I've gone through the budget, so you really get a chance to go through at a granular level, bottom- up. It's allowed me to get a pretty good grip on things and bringing some of my discipline and rigor from my prior life into how we think about costs here.
As I said again in my remarks, you got the full- year effect of Paddington and Canada Water joint venture fees that will come through next year, so that will bring the ratio down.
Mark.
Okay. Morning. Mark Mozzi from Bank of America. Can I ask you a question around what is your right now marginal cost of funding debt from a banking side and from a capital markets side? That would be my first question. The second one is: how do you think current high- inflation, high- rate, recession looming may potentially impact your guidance? We discussed about the cost and just making sure that it is up, this guidance, from 3.5% in H1 now to 4%-5%, just to make sure that's correct. How do you think your guidance can be revised in the current of, let's call it a stagflation? Thank you. Is it what you are assessing right now or not?
Sure. No, I'll take the second question and, Bhavesh, if you take the marginal cost of debt.
Marginal cost of borrowing is SONIA plus around 60 basis points, taking into account our existing bank facilities. If we were to do new capital market term debt, it would be around 3.5%.
I think, Mark, from the question, the 8%-10% cost inflation we're predicting for the next 12 months, and then the 4%-5% 12-18 months out, you're asking, does that reflect what we're seeing on the ground today? It does, absolutely. Obviously, inflation's very elevated, hence the 8%-10%, but as Bhavesh mentioned earlier, the 4%-5% reflects commodity prices continuing to increase but increasing at a lower- level. Same with energy costs. Importantly, what we think is happening on the ground is people are pushing back development schemes, so we're gonna see more capacity in the construction industry, which will moderate some of that cost inflation. 4%-5% on an ongoing basis is quite elevated inflation for construction costs.
As you saw, even if it surprises on the upside, we think that we can generate the rents, the higher- rents that are needed to offset that, particularly given our focus on London, where land is a big component of total cost.
For the guidance?
I'm sorry.
For guidance, are they assuming stagflation?
This is based on what we're seeing today, the current levels of inflation, current levels of interest rates. That's.
I meant on rental growth, on yield assumption and guidance you provided.
Okay. Yeah.
What sort of underlying macro assumption are you assuming?
It's assuming elevated inflation in the UK that you're seeing today and then some kind of moderating in line with the economic forecast you'll be seeing coming out of houses. It's not very much based on the sort of assumptions that's on the street today as opposed to a much more elevated view. Of course, we would change those assumptions if we went into a scenario of lower- growth and much higher- inflation.
John Mozley, Liberum. I'd like to ask a couple of questions about retail, please. The first question is that on a detailed level, you gave us the OCRs for your retail parks. I wonder if you might give us that for your shopping centers. Secondly, obviously, there was a big opportunity in the valuation of retail parks two years ago, and you were sort of hinting that some of the similar circumstances were beginning to build in shopping centers, and I wonder if that's told us something looking forwards.
Sure. No. Morning. Maybe if I answer that second one. We are seeing similar themes coming. 18 months ago, we saw that yields on retail parks were 8%, but we were seeing rents stabilize and yields of 8% for high-quality retail parks felt too high for stabilized rents. As you heard from Darren, we're seeing those rents begin to stabilize on the shopping centers. Yields are about 8%. For the best centers, we are seeing quite a similar dynamic. We still think on a look-forward basis, the structural factors make the retail parks and the likelihood of growth more appealing. Darren, I don't know if you want to take the first question.
Yeah, it's obviously linked. The comparator to the 8%, for example, that we've got, if you look at retail park ERVs, is roughly 12% for shopping centers. That's partly helped by the fact the rents have come off a bit more than 30%. The trading's very good. If you take somewhere like Meadowhall, you're getting that, those kind of fundamentals coming back. We've got occupancy back up to 96%. Start to get some tension on the ground. That's why we think that we're starting to see this stabilization effect occur.
A sort of final question. So far, there's not been very much external capital that's come into shopping centers yet. It's been mainly people who already own them shuffling their ownership around. Do you think it's likely that we see more capital coming in?
The key word there is yet. You haven't seen it through the metrics, the volumes that are coming through. As usual in the market, you hear investors talking about this, the fact they're looking at it before you see transactional evidence. That's what we're seeing at the moment. People picking up the phone a bit more, talking about it, thinking there's an opportunity there. You're buying in at 7-8%. If you think you can get a bit of yield compression 100 basis points, say, in the next 2 or 3 years, you're gonna be delivering double-digit IRRs. That's what's attracting people, including us.
Thank you.
Morning. Sander Bunck from Barclays. Two questions from my side. Firstly, on your capital rotation strategy, just kind of trying to understand how much of kind of dry assets are still left within the portfolio that you would be willing to sell, also considering the fact that your LTV is now 28%, obviously. So that's the first one. The second one is, you mentioned a few times in the presentation about potential for further yield compression. Do you think there is a risk in, maybe some, only some part of the markets that actually there is gonna be yield expansion? I mean, you alluded to the fact that your 10-year money will be 3.5% versus dry assets now yielding 4%. Shouldn't there be a higher- spread between those, two things?
On capital rotation, going back to maybe the presentation, we're constantly using our skills to create those assets that are in demand by investors. You should expect us to continue to recycle capital. Looking forward to this year, the obvious places where we're going to do that is probably more of the mature office assets, and that capital is then going into the development program. I'm not gonna give you a figure, but directionally, that's what to expect. Then, you know, on the question of yields, the forecasts we provided are based on today's market rates that are out there. Clearly, if rates go higher, that has a consequence. There is quite a big cushion today. You know, we focus a lot on the real yields relative to property yields.
Real gilt yields are negative by about 2%, so you've got this kind of 700 basis point cushion. As we sit today with corporate bond yields 3%-3.5%, property yielding 4%-5% with the, you know, not a perfect inflation hedge, we would accept. If you're in those markets with pricing power, you will get rental growth, and that then is a compelling mix. Those investors, and you've seen them, you know, with our own capital activity, they are allocating capital away from bonds into real estate. Given where we sit today, we think that is supportive of yields. As I say, it's based on interest rate forecasts today.
Sure. Okay. Thank you. Just slightly following up from the first question, totally appreciate that you don't wanna give a figure how much you're looking to dispose, but just for our understanding, how much of the office portfolio at the moment is kind of pretty dry? I mean, assuming that you're not gonna dispose obviously everything, but are we talking GBP 1 billion-GBP 2 billion or more or less? Or what are we looking at?
It's probably towards the bottom- end of that range you've just given. If you think of what we've got, Regent's Place, wonderful opportunity given what we're seeing in the innovation space, particularly with life sciences there. We see there's really good returns to drive there. We've obviously just done a capital transaction on Paddington, and we have a partner at Broadgate and lots of development upside. I think that gives you probably the moving parts.
Sure. Thank you.
If there aren't any more questions in the room, perhaps we go to the webcast. Jo, are there any questions on the webcast?
First is from Andrew Gill at Jefferies. Would you consider sub-funds like unit trusts or open your joint ventures further to attract external capital to take advantage of the movement from bonds into real estate to enhance returns?
Thanks, Andrew, for that question. Yeah, we would think about those kinds of structures. We've been very successful, as I mentioned, with the big institutional sovereign wealth funds. They're looking for the kind of skill sets that British Land have. They wanted to deploy a lot of capital, and they like the quality of the assets we have, but we will remain open-minded how we introduce capital into assets when we're looking to recycling. You know, we recycle that way, but we also recycle by just selling assets outright into the market. Jo, any other questions?
Yeah. One from Mike Prew, also at Jefferies. How much of your income is subject to RPI or CPI rental indexation, and how have those assets performed this year?
Darren, do you want to take that one?
It's a very small proportion of our rent. We can probably follow- up with the exact number, but it's tiny, Mike. It's not really relevant in the context of the group.
Last one, from Satnam Kumar. Could you give us a flavor of sort of acquisitions you might be targeting and at what yield?
Yeah, no, happy to do so. On the acquisition front and deploying capital, an obvious way we're deploying capital is into our development program, if you think about that gravitation to the best space that we're seeing. We've got some wonderful sites, great opportunity at Canada Water, so there's capital allocated there, but we will make selective acquisitions. You should expect us to continue to acquire sites for urban logistics, given the returns we're seeing on the assets we've already bought. We will likely buy some other assets in that Golden Triangle that I described that can be campuses for the future. That would be the likely areas. Any more, Jo?
No, that's all.
Great. If we just go to the lines to wrap up. Any questions on the lines? Just one question by the looks of it.
We have a question from Paul Gorrie at Citi. Paul, your line's open.
Hi, Paul.
Can you hear me okay?
Yeah. We can just about. A bit crackly, we could hear you.
Okay. I'll let you know if it doesn't come through okay. Basically, I had a question on the outlook for earnings, and specifically whether you're expecting to be able to demonstrate earnings growth given the disposal of Paddington Central for next year. Just tying into that, the impact of provisioning was obviously the main driver of the earnings beat for this year. Can you give us, it might be hard to guide on provisioning, I appreciate, but can you give us any indication on the materiality of how that might impact the P&L next year and tie into the earnings growth point? Thank you.
Thanks for your question. Look, we've got a number of moving parts. We've set out some guidance in the appendix on page 66. The principal items are capital activity and recycling, so you'll see the full- year effect of Paddington flow through next year, but be broadly offset by positive like-for-likes. Our Paddington transaction releases proceeds that we can invest in our committed pipeline. And as you heard me say in our prepared remarks, that will deliver around GBP 60 million of ERV in that committed pipeline, a third of which is already pre-let or under offer. If we look further ahead, we've got another further sort of GBP 75 million of ERV in sight from our near-term developments.
Provisioning?
Provisioning. We're, as I said, really back to pre-pandemic levels in terms of collection. We're about 85% provided for at the 31st of March. This is largely debtors that are age-related to amounts billed during COVID. Where recovery is a little bit uncertain, but we're comfortable with this level of provisioning given some of the macro uncertainties. We have a dedicated team that sort of chases down to collect every penny, and we continue to focus on that. We're so comfortable with where we're at from a provisioning perspective.
Any oth-
Okay. Just as a brief follow-up. What you're saying is provisioning is effectively unlikely to be a large input. There's no likelihood to be a large step forward next year because most of it's provided already. Is that correct?
That's correct.
Okay. Thank you.
Thanks, Paul. Any other questions on the lines? Oh, we've got one more on the webcast by the looks of it.
Yeah. From Marie at Green Street. Where would you like LTV to stabilize, now that you've brought it down with the sale of Paddington?
Well, look, firstly, I think it's a real positive, given the LTV that we're at, given the more uncertain environment that we're all operating in. As we've said before, I'll continue to moderate. We're comfortable with LTVs in the thirties. We do have opportunity to deploy capital, so we've got GBP 500 million of cost to come across our committed pipeline. As Simon talked about, we'll continue to screen the market for attractive returning logistics opportunities. We've got LTV in the thirties as we've done before.
No? I think that is all our questions, unless there's any more in the room. Thank you very much for joining us today. Great questions, and look forward to seeing many of you on the roadshow or at the conferences that are on over the next couple of weeks. Thank you for your time.