Warehouse REIT has achieved double-digit rents across 121,000 sq ft of space during the last three months of 2018.
The AIM-listed investor in small to medium-sized warehouses completed 14 new lettings and seven lease renewals in the UK at 14.2% ahead of estimated rental values. This generated £682,000 per year in additional contracted rent.
Andrew Bird, managing director of Tilstone Partners, the manager of Warehouse REIT, said that undersupply in the market was driving the demand. “We focus on warehouses that are 50,000 sq ft or under. This sector of the market isn’t seeing any new supply. The build cost of 10 individual buildings at 10,000 sq ft each is exponentially more expensive.
“Globally, people are talking about 5% vacancy rates in the industrial market, but we are seeing constrained supply in the secondary market.”
Another factor supporting demand, suggested Bird, are enquiries from a widening range of occupiers, with some likely linked to Brexit. “I think sometimes the media gives you the impression everyone is standing still, but we see all sorts of cross trade going on that is leading to demand for small to medium-sized warehouses. We have just leased a warehouse to a tenant who has expanded their business into India, since losing revenue in Europe. They need more space. So it feels like a healthy dynamic market.”
Additionally, he pointed to the range of demand, from foreign buyers to local institutions. “We made one letting to a Japanese cosmetic company. They will be using the warehouse to boost their UK internet sales… In Edinburgh, we had one empty warehouse that drew demand from three occupiers: Tesla Motorcars, Amazon and the University of Edinburgh.”
Separately, Warehouse REIT has also exchanged contracts to buy Air Cargo Centre at Glasgow International Airport for £11.1m. The REIT, which bought the asset from from Airport Industrial Nominees, is focused on buying property around airports.
Bird commented: “What we are trying to do is buy scarce commodities; we are not going to see any more airports any time soon. We can’t even agree if we should build a new runway at an existing one. We think these are key assets. This acquisition is fit for purpose and includes modern buildings, but we think rents have significant growth opportunity. We are looking at how the buildings are used, how much use there is for them, and how much turnover or profit existing occupiers can generate.”
Savills acted for Warehouse REIT on the airport deal.
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