Equites Property Fund says the ferocious demand for warehousing space in the UK has driven supply to decrease at its fastest pace on record, fuelling an increase in market rental growth.
Equites Property Fund, the only JSE-listed, industrial-focused real estate investment trust (Reit), is looking to build scale in the top end of the logistics market in the UK, in partnership with UK property investor Newland.
The partnership completed its first distribution facility in September, which will be leased to Amazon for 15 years, the company said on Tuesday, after releasing its results for the six months to end-June.
The two companies estimate that a pipeline of development opportunities will exceed £800m (R16bn) over the next three to five years, and will focus on modern distribution warehouses on a pre-let basis for blue-chip tenants on long-term leases.
Unlike retail and office landlords, Equites Property Fund benefited from the explosion in the use of e-commerce in UK and SA since the start of the Covid-19 pandemic.
“The strong performance over the past six months is underpinned by resilient property portfolios in SA and the UK, and further enhanced by the attractive development pipeline of logistics properties in the top-end of the UK logistics market,” CEO Andrea Taverna-Turisan said.
The distribution per share, the key performance metric for Reits, was up 5.3% to 78.38c, reaching pre-pandemic levels.
While online shopping has gained momentum in SA, it is still small as a percentage of total sales. Online retail sales made up just 2.8% of sales in 2020, said Arthur Goldstuck, CEO of technology research firm World Wide Worx. Online sales in SA are expected to nearly double to 5% by 2022, with a total value of R50bn.
“Equites is of the view that the focus on supply chain optimisation and growth in e-commerce will be strong tailwinds to the logistics property market in future,” it said in a statement.
Listed on the JSE in 2014, Equites specialises in providing space to multinationals that are prepared to sign leases for 10, 15 and 20 years and who, given their commercial might, tend to meet every rental payment on time.
The value of Equites’s investment property portfolio rose 9.4% to R21.1bn, while like-for-like net property income in SA rose 7.5%. Average rental collection rates were 99.6% in SA and 100% in the UK. The portfolio vacancy rate stood at just 1%.
Shares in Equites gained 1.03% to R20.61 on Tuesday, valuing the company at R14.6bn.
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