Roaring investment demand for property has fuelled a 7.4 per cent in the value of A&J Mucklow's portfolio of mainly industrial properties in six months.

At the same time demand from companies wishing to occupy industrial properties was hesitant, so that it was very hard to push up rents, s aid chairman Rupert Mucklow.

Despite that, Mucklow found tenants within two months of starting work on two industrial units it developed speculatively at Star Gate, Birmingham, its first such development for four years.

Together, they will be paying rents of £500,000 a year when they move in this summer, or £5.75 per square foot, a record for Mucklow.

The Cradley Heath company plans to start building shortly two more speculative industrial units costing £1.7 million at Middlemarch, Coventry.

It is still evaluating options, including an office develop-ment, for a 8.5-acre site close to the Worcester junction of the M5 bought in October for £4.9 million.

"This is a slightly false market, almost like it is over-heated," Mr Mucklow said. "It is institutions trying to find a home for their money, not property companies."

It is very unusual for industrial property prices to jump as they did in the first half of Mucklow's 2005/06 year. "There is so much money trying to find a home and too little stock," he added. "But the occupier market is stagnant, very patchy, not particularly strong at all."

Some occupiers are still nervous about their prospects and hesitate to take on more space. Mucklow keeps letting properties as they fall vacant, but without obtaining higher rents.

Profits for the half-year to December were boosted by the absence of £1.9 million of interest paid in the same months of 2004 on debentures that have since been repaid with the proceeds of several property sales.

An adjusted profit of £7.2 million is 11.2 per cent higher, while the adjusted net asset value per share has risen by 9.4 per cent to 417p. The interim dividend is raised by 7.4 per cent to 6.23p. The shares slipped 4p to 461p in yesterday's downbeat stock market.

Net rental income was down 20 per cent at £6.7 million, offset by a £2.25 million profit from the sale of 2.41 acres of residential land at Mellings Farm, Wigan.

The sale of three office buildings in Edgbaston for £8.08 million contributed another £290,000 profit. They were fully let for £600,000 a year, but most of the leases were due to expire within six years.

Mr Mucklow said he remains positive about future prospects.

Shares closed 4p down at 461p.