Investment trust insider on warehouses – James Carthew: a fair wind fills the sails of logistics funds
The big question on investors’ minds as they look to a post-pandemic future is which, if any, of the changes forced on us by the lockdown measures will end up being permanent?
Thinking about the potentially profound impact on companies and sectors, property leaps to mind as one that will probably have to adapt.
There is plenty of anecdotal evidence that the lockdown is accelerating the shift towards online shopping. My hunch is that many of us that were resistant to this trend ahead of the pandemic are now starting to embrace it.
The penetration of e-commerce is much more pronounced in the UK than in Europe, but Europe has been playing catch up. This process has put considerable pressure on most retail-focused property funds and triggered the launch of a number of focused on the warehouses needed to support online shopping and delivery.
Therefore, it has been surprising for me to see over the emergence of discounts on the once popular retail logistics sector. From the flagship Tritax Bix Box (BBOX) real estate investment trust (Reit), which is now on a 12% discount, to smaller players such as Urban Logistics Reit (SHED) on a 9% discount, and from the 20% discount on Tritax Eurobox (BOXE) to the 10% discount on Aberdeen Standard European Logistics Income (ASLI), value has emerged in a sector that ought to be booming in the current market environment.
By contrast, Supermarket Income Reit (SUPR) has held up well and stands on a 13% premium, despite the increasing take-up of online groceries – an area that looked relatively under-penetrated within e-commerce before the Covid-19 outbreak.
I get the attraction of SUPR – principally long, inflation-linked leases with good covenants and the ability to use stores as last-mile delivery facilities – but why is it trading on a valuation premium to many of the logistics property firms?… read more here