Slough Estates says it is confident of the future despite a profits setback.
Profit before tax came in at £119 million in the first half against £173.6 million in the same period last year.
But the value of the group's investment portfolio is up by 3.6 per cent to £4.2 billion.
Among the portfolio is the Kings Norton Business Park in Birmingham and units in Oldbury. Midlands interests are valued at some £191 million with an occupancy rate of 91 per cent.
Clients include Aggregate Industries, British Midland, Lloyds TSB, MFI and Tesco.
A total of 67,480 sq.m. of space was leased across the UK, a group record for a six month period, but overall occupancy rates were held back as equally some firms pulled out, vacating around the same amount.
The interim dividend is 6.5p, up 5.7 per cent.
The company said significant property purchases in the period in the UK totalled £28 million and in the US £191 million, while an initial foothold was established in the Netherlands.
And the UK business has been restructured into geographical areas.
Chairman Paul Orchard-Lisle said: "We have had an extremely active half year and the board is very pleased at the progress that has been made by management in re-focusing the business."
Chief executive Ian Coull said: "The business is in good shape and there is continuing evidence that occupier demand is improving in the business space markets we are serving.
"Whilst the consequence of the corporate activity undertaken over the last 12 months has been to reduce core earnings this year, we are confident that our acquisition and development programmes will bring growth from 2006 onwards.
"We have a strong balance sheet and we believe that there will be further opportunities to increase our exposure to flexible business space in the months ahead."
The new structure for the UK business, which now operates in six regional teams, was working well.
He went on: "It is providing the customer focus that we need in today's market, so that our property management and development teams work more closely with our customers at a local level and provide a more seamless service for all of their needs.
"It is a structure that has worked well for our businesses in Europe and North America and, in the UK, it will help us to increase occupancy, both by attracting new customers and, just as importantly, by retaining existing customers through greater responsiveness to their needs."
Citing signs of a general pick-up, Mr Coull stated: "In the first half we have pushed ahead with more development throughout the portfolio in anticipation of improving occupier demand.
"The level of enquiries increased by around 40 per cent on a year on year basis, although the second quarter of the year was somewhat slower than the first. The enquiries are converting into more viewings but there is little competitive pressure on occupiers to proceed quickly and as a result negotiations are taking longer than has historically been the case.
"The level of increased activity however gives us cause for some optimism and accordingly, we are continuing to develop prudently so that we have sufficient business space to meet the growth in demand."
At the end of the half year Slough had 170,032 sq.m. under construction, of which 48 per cent had been pre-leased.
In 2005 it is expecting to spend some £200 million on developments.
Mr Coull went on: "The overall property market is in a robust state. There has been a revival in investment in property as there is a recognition of the attractions of property as a key component in investment portfolios.
"Though offices in the UK, and in particular in the Thames Valley, still face some shortage in occupier demand and industrial growth continues to be slower than expected, there is today strong investor demand for well-located and well-let property. The investment case is underpinned by low inflation, affordable interest rates and a lack of funding to support speculative development excesses."
But he cautioned: "Although we believe that we have seen most of the downward pressure on yields, and expect some stabilisation in the coming months, it is too early to call an end to yield compression."
Slough said a key objective was to grow in Continental Europe, while in the US it was looking to exploit opportunities in health science.