Strong demand continues to drive growth for property group

A buoyant Midlands’ industrial property sector has been cited by Black Country developer Mucklow Group for an improved half-year performance.

The Halesowen group has reported a 5.3% growth in underlying pre-tax profit for the six months to December 31, 2016 to £7.9m (H1 2015: £7.5m).

Chairman Rupert Mucklow gave a muted welcome saying he was pleased with the results.

Looking ahead, he said it was still too early to predict what the longer-term impact of leaving the EU might have on the business.

“However, for our second half-year, we expect to continue to benefit from the robust, regional industrial property market and remain positive about prospects for the full year,” he said.

The results in more detail show statutory pre-tax profit declining to £9.1m (H1 2015: £14.4m) – the figures including a revaluation surplus of £0.5m (H1 2015: £6.9m).

Basic earnings per share fell to 14.39p (H1 2015: 22.72p) but the group has declared an interim dividend of 9.88p (H1 2015: £9.59p), a rise of 3%.

Cushman & Wakefield revalued the group’s property portfolio at period end with the investment properties and development land valued at £373.6m (June 30, 2016: £364.2m), which showed a revaluation surplus of £0.5m after acquisitions.

The initial yield on the investment properties was 6.3% (June 30, 2016: 6.4%). The equivalent yield was unchanged at 7.2% (June 30, 2016: 7.2%).

Cushman & Wakefield also revalued the group’s trading properties at December 31, 2016. The total value was £1.9m, which showed an unrecognised surplus of £1.4m against book value.

Tenant enquiries remained steady during the first half and the group said thus far, there had been no sign of any slowdown in activity.

Vacancy rate at period end was 4.1% (June 30, 2016: 3.2%), but would have been a record low of 2.5% if the group had not voluntarily taken back a 64,000 sq ft industrial unit just prior to the half-year end.

Average rental increases on new lettings and lease renewals were maintained at around 10% and, in some popular industrial locations, rental levels are continuing to rise in excess of this rate due to the tight supply of available space.

Industrial property values in the Midlands are said to have remained stable and property yields unchanged since the group’s valuation at year-end.

It said the high yield and growing rental returns offered by industrial property were still very attractive to investors, but capital growth had been restricted, mainly due to a limited number of investment transactions.

During the period, the group acquired a 70,182 sq ft industrial/warehouse building in Barton-under-Needwood for £5.6m. The property is located at the front of Barton Business Park and the unit is currently let at a rent of £0.41m per annum.

The group also completed the acquisition of a pre-let office development at Grove Park, Leicester for £4.7m. The property comprises 20,829 sq ft of high quality offices let at an initial rent of £0.35m per annum.

Terms were also agreed in November last year on its first pre-let development at i54 Wolverhampton. It is building a 44,250 sq ft industrial unit for Tentec, a subsidiary of Atlas Copco. Completion is expected in December 2017.