Post-lockdown occupier demand drives new transactions for Warehouse REIT
Warehouse REIT, the AIM-listed specialist warehouse investor which operates out of Chester, highlighted the ongoing imbalance in the supply of modern industrial space in a trading update today.
During the three months since May 25, 2021, the company completed four acquisitions, in separate transactions of which the majority were off-market, for a total consideration of £13.1m, reflecting a blended net initial yield of five per cent.
Generating £0.7m per annum of contracted rent – with an estimated rental value (ERV) of £0.9m – the acquisitions take Warehouse REIT’s portfolio past 8.5 million sq ft and have increased its holdings in two existing key locations, in South Cambridge, one of the UK’s fastest growing employment and innovation centres, and Midpoint-18, Cheshire.
In addition, contracts have been exchanged to acquire a further 16 acres of land immediately adjoining the existing Radway Green multi-let estate located at junction 16, M6 motorway, outside Crewe.
The company also completed 20 new lettings, achieved at seven per cent ahead of March 31, 2021 ERVs, totalling 112,000 sq ft and generating £0.7m of contracted rent.
Thirteen lease renewals also completed, achieving an uplift of 20.2% compared with the previous rent. Totalling 87,000 sq ft of space, these transactions generate £0.6m per annum of contracted rent. The portfolio’s total occupancy decreased slightly to 94.2%, as at July 31, 2021, from 95.6%, however, effective vacancy has reduced to just two per cent, excluding units under refurbishment or under offer to let.
Andrew Bird, managing director of Tilstone Partners, the investment advisor of Warehouse REIT, said: “We continue to witness strong occupier demand across the portfolio from a range of both e-commerce-related businesses as well as more traditional national operators and SMEs, allowing us to capture the significant reversionary potential as we continue to experience strong rental collection, in line with previous quarters.
“With lockdown restrictions easing, and H1 2021 take up 82% above long term take up (Savills July 2021), the chronic demand supply imbalance of modern industrial space, in economically relevant locations, will continue to underpin attractive rental growth, which the company is ideally placed to capture given its increasing scale and asset management expertise.”
He added: “The sector’s compelling fundamentals continue to attract new entrants into the market, which is driving yield compression and underpinning strong valuations.
“Despite this increased competition, with nearly a decade of experience investing in the space, we have been able to curate excellent relationships with prospective vendors, allowing the company to continue making accretive acquisitions deliberately focusing on adjoining ownerships to existing assets.
“Whilst our strategic priority is improving the quality of the income, we believe we can drive even stronger returns by complementing this approach through select tactical acquisitions with a value-add angle, as well as strategic development initiatives.”
