Urban Logistics REIT (SHED) says that further to the pipeline update announcement on 6 January 2020 (click here to read more), it is announcing a proposed placing to raise a target issue of £100m and an open offer and offer for subscription to raise up to around £6.7m.
Richard Moffitt, director and CEO of the company, commented: “Mid-box logistics assets at the end of evolving logistics chains are in short supply and offer excellent opportunities for investors seeking exposure to this high-growth sub-sector of the real estate market. We are in advanced negotiations on just under half of our £300m pipeline, enabling the rapid deployment of funds raised pursuant to the Issue into accretive high-quality income-generating assets. With greater scale, we are confident that we can continue to grow the Company and deliver attractive shareholder returns.”
SHED says that market activity in logistics remains robust
SHED went on to say the following: “Investor activity in the logistics sub-sector of the UK real estate market remains robust. Investment volumes in 2019 stood at £4.99bn in total, or 25.4m square feet, which was 20% down on 2018 but still above the 10 year long-term average.
Structural changes, in particular e-commerce and the continuing development of modern technology, are driving demand for logistics warehousing as well as a supply chain requirement to modernise and fulfil orders to urban areas nationally. The Company believes that current supply cannot meet the changing patterns of consumer demand and has therefore constructed a portfolio to benefit from this secular growth.
Regionally, the East Midlands saw the strongest take-up in 2019, accounting for 37.0% of total take-up. Meanwhile take-up in the South East and East Midlands represented 61.7% of total logistics take-up in the UK last year (source: CBRE Q4 2019 Logistics Market Summary). The company is well represented in these areas.
In terms of occupier interest, the distribution and online sectors together accounted for 44.8% of take-up in the year, which is a trend that has continued for several years now.
Speculative building is continuing across the Midlands, particularly in the ‘big box’ space of over 400,000 sq. ft.
The company, however, owns real estate in the urban logistics sub-sector of the UK commercial property market, with each property below 200,000 sq. ft. Supply in the 20,000-200,000 sq. ft. logistics space has fallen by 36.0% since 2012 with land being lost to higher value uses, meaning the Company is well positioned.
The company’s investment proposition is particularly focused on last mile warehousing and parcel depots. These facilities principally operate business-to-business delivery of domestic goods, such as food or pharmaceuticals. The UK continues to be one of the fastest growing adopters of online retail sales and there is a requirement for tenants to develop their e-fulfilment capability accordingly. As such, key geographic regions across the UK are seeing buoyant leasing activity.
The company also sees a strong market for local delivery driven by 10% expected population growth across major UK conurbations by 2038 (source: Savills). Savills also forecasts that growth of online retail could account for up to 25% of all retail sales by 2022, creating yet more demand for distribution warehousing.
The company’s focus will be to continue acquiring assets and implementing asset management initiatives with a focus on rental growth in light of the current market dynamic of diminishing supply and increasing occupier demand.”
SHED: Urban Logistics REIT announces plans for £100m placing