Thu, 25 Aug 2022 | COMMERCIAL PROPERTY
Last-mile logistics-focused real estate investment trust (REIT) Urban Logistics REIT has acquired warehouse assets valued at £90 million. The firm has acquired five warehouse properties across the UK, which it says have “significant potential for further value creating through active asset management.”
Four of the properties are income-producing, while one is vacant. The assets include a 249,211 sq ft logistics warehouse in Bardon, Leicestershire and a 97,362 sq ft West London warehouse fitted out for the storage of frozen food. Several of the properties are in highly-desirable locations, such as within London and in the logistics “golden triangle” in the Midlands, while a property in Sheffield is located within close proximity to the M1.
The acquisitions come at a time when competition for the UK’s rapidly diminishing logistics space is intensifying. The shift away from city centre shopping patterns and towards e-commerce or multi-channel retail, accelerated rapidly by the COVID-19 pandemic, has seen the importance of logistics hubs and out-of-town warehouse space increase dramatically.
The logistics site on Beveridge Lane, Bardon was acquired for £35.385 million at a net initial yield (NIY) of 4.7 per cent. The site, which is let to DHL Supply Chain Ltd on a lease running to 2027, is located two miles from the M1 and is described by Urban Logistics as offering near term asset management potential.
The frozen foods warehouse in Southall, West London was acquired for £46 million at a NIY of 1.9 per cent. The property, which has two months remaining on its lease, is described as highly reversionary, with the current tenants paying £10 per sq ft (psf) despite rents in the area standing in excess of £25 psf.
Urban Logistics says it anticipates letting the site quickly in order to capture this reversionary yield and expects to sign a new long-term lease with a 4.2 per cent yield, which it says “should create a significant valuation increase”.
In Sheffield, the company has acquired a 31,105 sq ft vacant industrial warehouse on Downgate Drive. The property, located close to the M1, was acquired for £3.12 million at a target NIY of 6.5 per cent and is currently being marketed to prospective tenants.
In Dundee, Urban Logistics has acquired a 29,834 sq ft logistics warehouse on the West Pitkerro Industrial Estate on Fowler Road. The unit, let to DPD Group on a lease to 2027, was acquired for £2.8 million at a 6.5 per cent NIY.
Finally, the company has acquired a 24,230 sq ft industrial warehouse on the Dodworth Business Park on Silkstone Road, Barnsley. The warehouse is let to a vintage clothing operator on a lease expiring in 2029 and was acquired for £2.6 million at a NIY of 5.2 per cent. The property has a low rent of £6 psf, which will be subject to an open market review in 2024, with Urban Logistics says offers good reversionary potential, with rents in the local area standing in excess of £7.50 psf.
Commenting on the acquisitions, Urban Logistics REIT CEO Richard Moffitt said: "During recent market volatility we have been deliberately patient in our deployment, and that patience has been rewarded by our ability to acquire these properties in prime locations on advantageous terms.”
"Our occupational market, with its focus on supply chains for essential goods, remains strong with continued upward pressure on rents. We firmly believe that, at any stage in the property cycle, if we improve lease lengths we will see yield compression. We therefore see substantial potential valuation increases in these acquisitions, driven by our asset management plans."
Read more about how the growth of e-commerce is impacting the UK's commercial property market.
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