The urban warehouse market is compelling for asset owners. It presents us with significant opportunities for long-term value creation, through further growth in the portfolio and active asset management.
Covid-19 has accelerated the already powerful trends driving demand for urban warehouse space, in particular the structural shift from high street retail to e-commerce. Demand for space is coming from an increasingly diversified occupier base, who compete for the same buildings.
Capital values for small and medium sized warehouses are typically well below replacement cost, making it uneconomic to develop new assets in many areas. Combined with strong occupational demand, this means there is a limited supply of urban warehouse space available to let in economically attractive locations.
The demand and supply imbalance contributes to growing market rents. Coupled with the benefits of our active asset management programme and the strong reversionary potential in the portfolio, this contributes to robust growth in our rental income each year.
We have an experienced Board and a highly knowledgeable Investment Advisor, Tilstone, which gives us a deep understanding of the sector and a wide network of industry contacts through which we can source investments.
We continue to see good opportunities to acquire assets at below their replacement cost, while further diversifying our income and strengthening the portfolio’s sustainability, quality and growth prospects. We also have the potential to drive further value from underutilised land within the portfolio.
Strong returns and quarterly dividends
Our diversification by occupier, lease length and geography reduces risk and gives us a sustainable income stream, allowing us to reward shareholders through attractive dividends. These dividends, along with capital growth, contribute to a total return target of 10% per annum.