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QuotedData’s Real Estate Roundup – December 2021

Real Estate Roundup

Kindly sponsored by Aberdeen Standard Investments

Performance data

November’s biggest movers in price terms are shown in the charts below.

November ended under a cloud of uncertainty, with the discovery of the Omicron coronavirus variant threating a return of restrictions that have wreaked havoc in the property sector over the past two years. Regeneration specialist U and I Group topped the charts as the best performing company in the month after Land Securities announced it had agreed a deal to acquire the group at a massive 73% premium to its prevailing share price. It was a busy month for Land Securities, which saw its share price rise 4.8%, reporting an increase in NAV in half-year results and announcing a further large acquisition. The listed specialist self-storage operators continued their impressive year of growth, as the sector continues to benefit from demand-side pressures. Lok’n Store was up 16.2% in the month (43.7% in 2021), Safestore was up 10.7% in November (70.6% in the year to date) and Big Yellow Group was up 10.3% in November (48.8% in the year). Dedicated logistics players SEGRO and Tritax Big Box REIT saw impressive gains in November, as the sector continues its run, buoyed by increased demand for space from online retailing. In the year to date, the two companies’ share price gains are 48.7% and 41.8% respectively.

Office specialists dominated the worst performing property companies in November, perhaps due to the ongoing uncertainty for the future of that sector, with working from home and sustainability trends expected to impact on rents and valuations. CLS Holdings, which owns a £2.3bn portfolio of offices in the UK, France and Germany, saw its share price fall 9.2% in the month. London office developer and owner Helical also saw a negative move in its share price in the month, despite reporting an uplift in portfolio valuations and NAV in half-year results. The share price of small-cap regional office landlord Circle Property also fell. Student accommodation specialist Empiric Student Property was down 7.8% after reporting occupancy across its portfolio for the current academic year was at 81%. Urban Logistics REIT’s share price dropped 6.1% in the month after announcing a proposed £200m equity raise (more details on page 3) at a similar discount to its share price. This was despite the group reporting strong half-year results in which it posted NAV growth of 7.9%. European logistics owner Tritax EuroBox saw its share price cool in November, having increased almost 10% in the year to date as it continues to deploy the proceeds of recent equity raises.

Valuation moves

Corporate activity

Life Science REIT successfully raised gross proceeds of £350m from its initial public offering. The company will invest in life science property, such as laboratories, in the so-called golden triangle of London-Oxford-Cambridge.

Assura raised £182m in an oversubscribed placing. The group has an acquisition pipeline worth £102m in legal hands and a development pipeline worth £480m.

LondonMetric raised £175m in a placing and retail offer. The issue price of 260p per share was a 3% discount to the closing price. The group will use the proceeds to acquire a portfolio of logistics and long-income assets.

Sirius Real Estate raised £137m in a capital raise, that it used to part-fund the acquisition of the UK flexible business space owner BizSpace for £245m.

Land Securities agreed terms of a recommended all cash offer for U and I Group, valuing the company at £190m. Under the terms of the acquisition, U and I shareholders will receive 149p per share, which was a 73% premium to the closing price of 86.0p.

Slate Office REIT has agreed a deal to buy Irish office investor Yew Grove REIT for €177.4m. The deal would see Slate acquire the entire issued share capital of Yew Grove at a price of €1.017 per share, representing a premium of around 1.7% to the share price.

Grit Real Estate Income Group, the pan-African property investor, announced a proposed open offer and placing to raise $215.6m. The group intends to use the proceeds to lower its loan to value and acquire a majority stake in developer Gateway Real Estate Africa.

Urban Logistics REIT announced plans to raise £200m in a placing and intermediaries offer at a price of 170p per share. It has a pipeline of investment opportunities in the ‘last mile’ logistics sector worth more than £400m.

Major news stories

Land Securities acquired a 75% stake in MediaCity, the 37-acre media, digital and tech hub home to the BBC in Salford, Greater Manchester, for £425.6m.

  • Hammerson in discussions over Glasgow shopping centre sale

Hammerson confirmed reports that it was in discussions over the sale of its 50% stake in the Silverburn shopping centre in Glasgow for £140m. It said that the sale, if it progressed, was part of its non-core asset disposal programme.

LondonMetric bought two logistics warehouses for £135.6m in separate transactions, reflecting a blended net initial yield of 4.2% and a reversionary yield of 4.8%.

Tritax EuroBox agreed a deal to fund the development of a €117.9m logistics asset in Bönen, Germany, which will comprise 66,065 sqm of space and is pre-let to the Rhenus Warehousing Solutions, a logistics service provider, on a 15-year lease.

Supermarket Income REIT acquired a Sainsbury’s supermarket in Swansea, South Wales, and a Tesco supermarket in Maidstone, Kent, for a total purchase price of £73.0m, reflecting a combined net initial yield of 4.6%.

  • Home REIT’s growth continues with £62.6m acquisitions

Home REIT deployed a further £62.6m of the proceeds raised in the company’s £350m equity issue in September 2021, into the acquisition of 19 portfolios comprising 173 properties and 829 beds, bringing its portfolio to more than 6,500 beds.

  • Harworth sells Yorkshire industrial development site

Harworth Group sold its Kellingley development site in Selby, North Yorkshire for £54.0m, a big premium to the site’s most recent valuation of £31.1m at 30 June 2021.

Workspace Group, the flexible office space provider, acquired The Busworks, in Islington, for a total of £45m.

Schroder Real Estate Investment Trust acquired a portfolio of four industrial assets in the north west of England for £19.85m, reflecting a net initial yield of 6.9%.

AEW UK REIT bought Central Six Retail Park in Coventry for £16.4m, reflecting a net initial yield of 11%. The retail park provides 148,765 sq ft of space and is let to TK Maxx, Next, Boots, Sports Direct, Burger King and Poundland.

QuotedData views

Managers’ views

A collation of recent insights on real estate sectors taken from the comments made by chairmen and investment managers of real estate companies – have a read and make your own minds up. Please remember that nothing in this note is designed to encourage you to buy or sell any of the companies mentioned.



Brian Bickell, chief executive:

The global pandemic has been the most disruptive event we have experienced in generations, within a few months bringing unprecedented uncertainties and upheaval in the normal patterns of our lives. The availability of effective vaccines has radically improved the prospects of the crisis receding, but the pandemic may have a lasting effect on behaviours and individuals’ expectations and aspirations.

It is too soon to assume the pandemic is now firmly behind us, with the continuing risks of virus variants and further disruption. In the UK and beyond, emerging concerns regarding inflation, shortages of labour, global supply chain issues, debt levels and government finances are now affecting the economic outlook. Meanwhile, the global climate crisis and the imperatives of decarbonisation and sustainability are now the priorities of governments, businesses and communities around the world.

The long-term success of London and the West End reflect their ability to embrace and adapt to challenges and change, drawing on their wealth of talent, creativity and diversity. Despite near-term challenges, they will continue to be a magnet for international businesses, tourists and investment, underpinned by their local and domestic appeal.

NewRiver REIT

Allan Lockhart, chief executive:

Consumer spending continues its rebound and it is clear that, despite an understandable acceleration in online shopping over the pandemic, physical retail remains the dominant channel accounting for almost 60% of non-food sales. Within the grocery sector less than 15% of food sales are performed online and almost 90% of the UK online grocery market is fulfilled from retail outlets.

Outstripping the growth in online retail is click & collect; spend in this area is forecast to increase by £3.1bn in the next five years across all UK retail, rising 45.8% to reach £9.8bn by 2024. This is very supportive for our community centred assets which have the retailers, parking and accessibility required for this type of fulfilment model. Retailers recognise the role of physical store networks as effective fulfilment centres which can also be used to process online returns at reduced costs. Indeed, major retailers are actively encouraging click & collect for economic reasons and multichannel retailers within our own portfolio have highlighted the vital importance of stores to their online sales fulfilment. Amazon, the UK’s largest online retailer, also recognises the important role that physical stores can offer in customer engagement through click & collect which is why Amazon is increasing their Amazon Fresh and Amazon 4-star store formats.

Coupled with an improvement in the consumer and retailer backdrop, liquidity in the retail real estate market has shown a clear improvement this year. This is particularly the case in the retail park sector where 2021 is expected to record the second highest deal volume in the past 10 years. Transaction volumes for shopping centres are already three times higher than the whole of 2020. The improving liquidity across the retail asset class, driven by private investors in shopping centres and increasingly institutional investors in retail parks, offers support for further valuation growth.



Gerald Kaye, chief executive:

We continue to believe that the key trends we have identified of sustainability, wellness, enhanced amenities and technology will be of upmost importance to occupiers and investors within the central London market. Furthermore, these trends are increasingly being shown to be accretive to value, with Knight Frank recently reporting a 12.3% rental premium for achieving a BREEAM “Outstanding” rated building. We also believe that the gap between prime and secondary property will continue to widen, which will enhance the value of our existing portfolio and will provide significant opportunity for us to apply our strategy of redeveloping, refurbishing and repositioning properties that are no longer fit for purpose.

Great Portland Estates

Toby Courtauld, chief executive:

Given the cyclical nature of our markets, we actively monitor numerous lead indicators to help identify key trends in our marketplace. Over the last six months, given the continued economic recovery, our property capital value indicators have seen further improvement. We expect investment activity in the central London commercial property market to trend towards more normalised levels and prime yields to continue to come under downward pressure given the continued demand for central London real estate. In the occupational market, given a strong leasing and rental performance of the portfolio in the first half of the year, we have upgraded our rental value growth range for the financial year to 31 March 2022 to between +2% and +5%, predominantly driven by the positive performance of our office portfolio.


British Land

Simon Carter, chief executive:

Current market trends reinforce the conviction we have in our strategy. The trend towards more flexible working has clearly accelerated during COVID and office demand is more firmly polarising towards the highest quality most sustainable space. This is exactly what we deliver at all our Campuses, where we also benefit from strong demand from innovative growth sectors. Over the next 12 months, our central case is for rental growth on our Campuses of 0-3% with yield compression likely.

We expect the value play opportunity in retail parks to continue, driven by reducing yields and rent stabilisation including some rental growth for small, well located parks. In shopping centres, valuation decline has slowed, and we expect to see continued yield stabilisation with the rate of ERV decline also slowing. The market for urban logistics assets to support last mile delivery in London remains excellent and we expect continued strong rental growth with further yield compression possible.

The economy continues to recover but we recognise that uncertainties remain in the macro environment, particularly with respect to rising input costs. However, longer term trends including the demand for high quality workspace, omni-channel retail space and urban logistics in London positions us well for the future.

Land Securities

Mark Allan, chief executive:

As a result of the success of its vaccination programme, the UK appears reasonably well placed to navigate autumn and winter without needing to revert to lockdowns or other excessively restrictive measures. However, it is by no means certain that this will be the case. In addition, people’s behaviour patterns are still difficult to predict; it is challenging to discern short-term ‘pent up’ demand driven factors from long-term trends; and supply chain disruption is likely to remain an issue for a number of months, raising inflation concerns.

We remain alert to all these risks but, overall, our outlook is one of cautious optimism. We are providing high quality, sustainable office space that is very well aligned to today’s customer demands; in our retail portfolio we are generally seeing leasing activity supportive of ERVs for the first time in quite a while and increasing evidence of a ‘flight to prime’ for which our portfolio is well placed; and we are building real momentum with our mixed-use development activity. With a strong balance sheet, a portfolio suited to changing customer needs and a clear strategy that positions the business for long-term growth, Landsec is well placed for the future.



Andrew Jones, chief executive:

We believe that real estate can continue to offer reliable, repetitive and growing income. At the same time, asset values in our chosen sectors are still being driven by attractive demand/supply fundamentals as consumers continue to shift their behaviours and more occupiers consider just in case logistic strategies rather than just in time in response to a more disruptive world.

Whilst it is not apparent today, we are mindful that at some point in the future speculation will overtake rational thinking and so we continue to adopt a careful approach so that we aren’t swept away in the wild enthusiasm. Consequently, we do not believe all distribution warehouses are great, in much the same way that not all retail investments are poor.

As large shareholders ourselves, we have a high degree of alignment and so we will always look to buy right, build right and manage right content in the knowledge that we have invested in the right sectors and own some wonderful buildings that are let to some fantastic businesses.

Urban Logistics REIT

Richard Moffitt, chief executive:

The world has changed over the last two years, and we have seen those shifts validate our strategy of focusing on the last mile end of the supply chain within the logistics market. Looking forward, the fundamental dynamics of this market are unlikely to change negatively in the near term. The twin shocks of Brexit and COVID-19 revealed the extent to which supply chains in the UK had been optimised for cost, speed and efficiency, but not resilience. Shocks like the Evergreen Suez blockage, and port delays, dominated the first half of the year, while HGV driver shortages have led to empty shelves in supermarkets and dry petrol forecourts more recently. Supply chain management is often a trade-off between a lean supply chain (fast and at low cost) and a resilient supply chain (able to withstand shocks).

The first half of 2021 was the busiest on record for take up of new space, at 24.4 million sq ft – 82% above long-term average. This beat the previous record set in 2020. Vacancies are down from 20% in 2010 to just 4% in 2021 (source: Savills). When we look at the available stock on the market today, we can see that supply is at its lowest ever level, at approximately 20 million sq ft. The majority of this supply is second-hand space, with grade A and new space making up only a small proportion of available stock (source: Savills).



Jonathan Murphy, chief executive:

The pandemic has highlighted and exacerbated the existing problems that need to be addressed within our primary healthcare infrastructure. With record waiting lists, pressure on the NHS remains high. With an ageing population demand for health services will only grow. With a large proportion of the country’s medical centres out-dated and not fit for purpose, the delivery of health services in a community setting that relieves some of the pressure in the system remains extremely challenging. The adoption of technology, in particular for triage and routine appointments, is needed to help relieve this pressure but face-to-face consultations in suitable spaces remains an essential part of delivering adequate clinical services.

Recent government announcements have pledged significant funding to tackle these issues. The Health and Social Care Levy, announced in September 2021, will see £36bn invested over the next three years in clearing waiting lists through increasing capacity within the system. The Autumn Budget pledges £5.9bn of investment in physical infrastructure and equipment, including diagnostics testing facilities and improving IT and digital technology within the NHS.

The recognition of the issues within the system and the increased funding are welcome, and we look forward to seeing how this will flow into the significant required investment in the primary care infrastructure needed to deliver this capacity.


Custodian REIT

Richard Shepherd-Cross, investment manager:

The resilience shown by real estate during the pandemic and its strong recovery in the last six months, notwithstanding the threat from new COVID-19 variants, bears testament to continued occupier demand in industrial/logistics and retail warehousing, in particular. In addition, the motor trade has also performed well and we are witnessing a recovery in occupier demand for offices.

Increasingly tenants require properties that meet their environmental and social objectives, never more so than in the office sector, where businesses will need to attract their staff back to the office and away from home. Custodian REIT is poised to meet the demands of its tenants and potential new occupiers, in this regard, investing in EV (electric vehicle) charging on its retail parks and office sites and focusing refurbishment and re-development budgets on environmentally responsible fit out while working with tenants to improve the energy performance of existing buildings.

For so long as we can offer properties to our tenants that are fit for purpose and that lead on environmental performance improvements, we remain confident that the company’s diversified portfolio of smaller regional property will continue to deliver the long-term returns demanded by our shareholders.


Stephen Hubbard, chairman:

The outlook for the UK economy is increasingly positive and the government has announced its winter plan for the UK stating the main line of defence as vaccine and not lockdown. The replacement of restrictions with guidance and advice will undoubtedly assist our tenant stakeholders, in particular the hotel and pub operators.

We continue to see a polarisation in cap rates in long income valuations, with those sectors worst impacted by COVID-19 yet to recover fully. The strong trading over the summer months for hotel and pub operators should help to improve investor confidence and there remains the potential for further recovery in these asset valuations.

The prospect of increasing inflation is beginning to concern investors, with RPI now forecast to exceed 4% for 2021. The group’s portfolio is well placed to deliver inflation protection for investors with 96% of the portfolio’s rent reviews linked to UK inflation or containing fixed uplifts (58% RPI, 17% CPI and 21% fixed).

Schroder REIT

Lorraine Baldry, chairman:

The outlook for the UK real estate market is positive, with economic growth expected to continue, coupled with a supportive interest rate environment. Whilst we expect ongoing divergence in returns across the real estate market, with the industrial sector continuing to outperform over the short to medium term, the polarisation experienced over recent years is expected to narrow as more employees are encouraged to return to offices and sentiment continues to improve towards more resilient parts of the retail sector.

Whilst the outlook is positive, the UK recovery will need to absorb the gradual winding down of government support, and rising COVID-19 case rates over the winter could move the government to redeploy social distancing measures. Supply shortages and rising inflation have also created near-term headwinds that could weigh on activity in the coming months. Whilst this could be disruptive to the recovery, low interest rates and an abundance of capital seeking higher-yielding assets should support demand for good quality real estate.


Mark Burton, chairman:

The easing of most of the remaining COVID-19 restrictions, combined with the continued rollout of the vaccination programme, has lifted most economists’ outlook for the post COVID-19 rebound in the second half of 2021. In light of this, the property market has experienced a gradual recovery, with rent collection levels greatly improving, as cash flow pressures on tenants ease.

Picton Property

Lena Wilson, chairman:

We are encouraged by the level of activity across the portfolio, which has been driven in particular by the further opening up of the economy following the easing of lockdown restrictions. Our industrial and retail warehouse portfolio is close to 100% occupancy, with our office portfolio offering the greatest scope for income uplift through further leasing progress.

As businesses continue to return to the office, either full time or on a hybrid basis, we expect office demand to start to improve over the next six months. We anticipate that our assets, following our improvement and repositioning programme, will benefit from increased occupier demand, as businesses increasingly seek better quality accommodation and amenities for their employees.

While we recognise the inflationary pressures in the economy, including supply shortages, a tight labour market and increasing construction costs, we believe this will be offset in assets where the occupational supply and demand balance will continue to support rental and income growth.

Since the start of the pandemic, many UK listed commercial property companies have traded at an increased discount to their net asset values. This divergence in real estate equity pricing is more pronounced in some companies than others and we view the situation across the sector as unsustainable in the long-term. Combined with well-publicised issues in unlisted property funds, we believe there is an opportunity for the market to benefit from some consolidation in order to generate the economies of scale that can be achieved through the removal of duplicated management costs, improved liquidity and greater overall efficiency.

Real estate research notes

Civitas Social Housing – Short shrift to short seller

Lar Espana Real Estate – Ducks in a row

Standard Life Investments Property Income Trust – Post-COVID ready

Aberdeen Standard European Logistics Income – Handbrake off in growth drive


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211206 November property roundup

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