Industrials Reit continues its search for new acquisitions in UK

With increasing demand for space in the UK, specialist multilet industrial (MLI) property fund Industrials Reit, formerly Stenprop, plans to invest £100m (R2.1bn) to £125m a year in new asset acquisitions.

These will be located close to densely populated urban areas across the UK.

Company CEO Paul Arenson said that demand has been driven primarily by e-commerce growth as an increasing number of small and medium enterprises (SMEs) and retailers now trade online and require warehouse space for operations.

“Record low availability of suitable space in urban locations after the high levels of take up we have witnessed in the past 20 months from delivery companies, manufacturers and businesses that have pivoted their model to include more omnichannel retail offerings drive demand for industrial space,” Arenson said.

Furthermore, with supply chains challenged, companies are keen to hold higher levels of inventory as close to consumers as possible, and this has further accelerated efforts to secure industrial space across the country, he said.

“The list of businesses renting out MLI space is very wide, with no particular driver other than the ability to harness newage supply and distribution channels.”

Recent figures from market and consumer data firm Statista show that the industrial and logistics sector in the UK has grown in popularity with investors. The Covid-19 pandemic, the finalisation of Brexit and safeguarding the integrity of supply chains has made the sector even more desirable.

During the fourth quarter of 2020, investments in the UK industrial and logistic sectors recorded a high of £5.58bn, compared to £2.09bn and £5.1bn for the retail and office sectors, respectively.

Arenson said that across the portfolio tenants pay affordable rentals of 2%-3% of turnover, which bodes well for the fund. Average monthly rent across the MLI portfolio is about £5.65 per square foot.

During the period the company was able to increase rent by an average of 5%.

Arenson said the company hopes to complete the move from the Specialist Fund Segment to the Premium Segment of the London Stock Exchange (LSE) later in December. The LSE will then become the primary fund listing while the JSE will be secondary as Industrials Reit has about 20% of total fund shares on the SA exchange.

“With the last four transitional years behind us, the fund is now well positioned to take advantage of potential growth opportunities within the industrial and logistics sector in the UK.”

Moreover, he said, as Industrials Reit becomes a fully MLI landlord and investor, after the sale of its German care-home portfolio, it will continue recycling capital from disposals to acquire additional UK MLI assets given the increased demand.

The fund will look to achieve the economies of scale that come with having a larger portfolio. “We remain confident of delivering a total accounting return of at least 10% for a number of years to come. The growth and annual returns we have indicated are based on a very real assessment of the market and how well positioned our portfolio is given the favourable structural trends that will continue increasing asset values and rent levels,” Arenson said.

Industrials Reit’s MLI portfolio consists of 99 assets with a gross lettable area of about 6.6-million square feet.