Big shed specialist reports healthy first half

Tritax Big Box REIT has reported first-half operating profit as up by 34% to £56.4m as the niche investor declared itself well placed for further acquisitions.

In January, Tritax acquired AO.com’s 388,000 sq ft Crewe distribution facility for £36m, a deal that followed the purchase of a 315,000 sq ft Stobart Group warehouse at Carlisle Lake District Airport for £23.6m.

At the half-year mark, Tritax had a roster of just 38 tenants, representing what it described as “owning some of the best known and well-respected brands in omni-channel retail,” with 82% of is contracted customers being members of major stock market indices in the UK, Europe and the USA.

Chairman Richard Jewson said: “The group is well positioned to take advantage of the changing dynamics in the logistics market, in particular technical innovation in the form of e-commerce. This is affecting fortunes on the high street with a number of well-publicised retailers having succumbed to a challenging trading environment.

“Despite the depreciation of sterling having made imports more expensive, we feel that Brexit does not yet appear to be affecting occupier demand for Big Box space significantly. We expect to see continued healthy occupier requirements for well-located logistics buildings which enable occupiers to remain competitive by delivering economies of scale benefits, cost savings and improved operational efficiencies.

“Market rental growth remains ahead of underlying inflation and we believe that trend will continue in the near term. This supports the continued strong investment demand for UK logistics assets which produced further yield compression in the first half of this year.

“We are well capitalised and this will allow us to continue to add high quality assets to the portfolio selectively. We expect to continue to do so at attractive prices.”

As of 30 June 2018, the firm’s portfolio was 100% let or pre-let and income producing with 44% of its rent roll not due to expire for at least 15 years. At the period end, CBRE assessed the portfolio’s headline estimated rental value at £147.2m per year, up from £139.36m. Since the reporting period ended, Tritax has also acquired a facility pre-let to Amazon, for £120m.

Jewson concluded: “Big boxes have become increasingly central to retailers’ business models due to the key role they play as part of a logistics framework.

“Not only do they provide a breakdown point for goods imported in bulk and hold finished goods for distribution, but they have become quasi-retail outlets, distributing an increasing breadth of goods directly to consumers whilst also fulfilling store replenishment and via both routes handling an increasing volume of returns.

“By amalgamating e-commerce and store logistics under a single roof with a full product line a retailer can cope efficiently with changes in short-term consumer demand and the longer-term trending from store to online sales.”