Urban Logistics REIT sees rent boom while eyeing expansion

Urban Logistics REIT saw rental income jump 8.4 per cent last year as the company leaned into the UK’s logistics market.

The FTSE 250 listed real estate investment trust reported a total property return of 4.8 per cent in the year to 31 March, compared to a drop of five per cent in the previous year.

Momentum notably shifted for the company in the second half of the year, with the first half seeing a new rent increase of just 10 per cent, compared to 27 per cent in the second half.

Tim Leckie, analyst at Panmure Gordon, said the most important part of the results was its tone and messaging, which marked “a real phase shift in the underlying market conditions, from leasing to investor sentiment to management’s appetite to deploy marginal capital”.

Vacancy rates for the trust also continued to fall, dropping from 7.4 per cent to 5.8 per cent.

Urban Logistics REIT made headlines this year after jumping into a bidding war for Abrdn Property Income Trust in an attempt that was ultimately unsuccessful.

The £575m trust is currently sitting on a 25.6 per cent discount to its underlying assets, sitting in the red for over two years.

Over the last three years, its share price has fallen 13.4 per cent, compared to net asset value rising by 22.9 per cent in the same period.

Richard Moffitt, CEO of the trust’s investment adviser, said: “The two halves of the period under review were characterised by markedly different conditions. In the first half, uncertainty levels remained high with a lack of clarity on the likely trajectory for both interest rates and inflation. Towards the end of the second half of the year, confidence improved thanks to strengthening macro-economic conditions.

“The key priority for the company is to drive earnings growth and build dividend cover. We are focused on reducing vacancy and capturing upside at rent reviews to drive the significant revisionary potential within the portfolio, with one new letting over a vacant asset in the final stages of legals, which will provide £1m of annual rental income, and reduce vacancy to 4.5%.

“As market conditions continue to improve, the investment adviser believes that now is the right time to deploy additional capital, aiming to enhance earnings per share and rebalance the portfolio from core assets to asset management opportunities.”