Leasing market back as Urban Logistics REIT reports 23% uplifts in rents

Urban Logistics REIT reported an average rental uplift of 23% on leases signed in the first quarter of this year as occupational activity returns.

The company completed three new lettings (including one at a vacant asset) and three rent reviews in the period, covering 374,000 sq ft of space. This totalled £1.3m in new annualised rental income (equal to 0.3p of rental income per share).

As a result of the new lettings, occupancy increased to 94.2%, compared with 93.2% at 31 December 2023.

New lettings brought in £1.1m of new rental income, with a WAULT of 11.9 years, and rent reviews provided a further £0.2m in additional rental income. Further lettings are under offer.

The company has also announced the sale of an asset in Bedford for £3.8m, at a 1.9% premium to net book value, at a 5.4% net initial yield, with the proceeds used to pay down floating rate debt.

The Elms Industrial Estate was acquired in 2016 for £1.25m. Having conducted a comprehensive refurbishment in 2022, which included adding PV cells on the roof and improving EPC from an E to an A, the sales price represents a 40% profit on cost, after accounting for refurbishment costs.

Richard Moffitt, chief executive, commented: “We have seen increased occupational activity in the latter stages of the financial year, with a significant rise in like for like rental rates. This provides evidence that valuations are stabilising and rents improving in our sector, as tenants continue to localise their distribution networks to be closer to their end customers, and demand for our mid-size, single-let assets continues to increase.

“The optimism in our sub-sector supports our confidence for the coming year, during which we will see the benefit of a full year’s rental income from recent leasing activities flowing through to higher earnings. Our increased occupancy rate is welcome, and the majority of our remaining vacancy is made up of two assets, for one of which a new lease is at an advanced stage of negotiation.

“Going forward, we remain focused on our strategy: delivering earnings and capital growth from targeted real estate acquisitions, active asset management, supported by a strong balance sheet, a low LTV, and strong relationships with banking partners.

“We look forward to presenting our plans and activities in greater detail at our Capital Markets Event in May. This will give us the opportunity to set out the strong investment case for single-let, last mile/ last touch mid-box assets across tenant appeal, their role in the build out of logistics infrastructure in the UK, the positive long term cash flow characteristics of our assets and our strong total return proposition.”

The capital markets day will be held on 15 May, while the company plans to report annual results on 20 June.

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