Tritax Big box flags solid year as demand recovers

Tritax Big Box reported a resilient occupational market in a full-year update on Monday, recovering to pre-Covid levels, along with a stabilisation in investment yields.

The FTSE 250 company said it achieved 22.1 million square feet of UK lettings in 2023, compared to 38.0 million square feet in 2022.

Additionally, there were 11.1 million square feet under offer by the end of 2023, with take-up figures aligning with pre-Covid averages.

Despite a ready-to-occupy vacant space of 5.1% in 2023, compared to 2% in 2022, prime headline rents increased by 7.8% during the year.

The board said the logistics real estate transaction market remained subdued, with prime market yields for high-quality rack-rented buildings featuring approximately 15-year unexpired lease terms and open market reviews hovering around 5.25%.

Tritax Big Box reported ongoing development performance as it secured £7.8m of additional annual contracted rent through 0.9 million square feet of development lettings at a 6.7% yield on cost, with an additional 0.9 million square feet in solicitors' hands.

Additionally, 1.7 million square feet of development started in 2023, potentially adding £15.6m per annum to contracted rent targeting a yield on cost of about 7%.

The company, however, expected deferred recognition of development management agreement (DMA) income to occur in 2024, while maintaining long-term development guidance.

Actively managing its portfolio to optimise performance, Tritax Big Box said it achieved 6.9% like-for-like estimated rental value growth in 2023, resulting in a record 23.0% portfolio reversion.

An additional £4.9m was added to annual contracted rent from rent reviews and asset management initiatives, including a 9.1% increase in passing rent across 22.5% of the portfolio subject to rent reviews.

The company also completed £327m of disposals at or above book value, rotating capital into higher-returning development and investment opportunities.

Furthermore, £110m of urban logistics investment acquisitions were completed with the potential for significant near-term rental reversion capture.

The company reported its strong financial position, with a loan-to-value of 31.6% at the end of December, well within its medium-term guidance range of 30% to 35%.

With a weighted average cost of debt at 2.9% and 96% of drawn debt hedged, Tritax Big Box had a weighted average debt maturity of 5.2 years and total available liquidity exceeding £500m.

That included its successful £500m refinancing of a revolving credit facility in October.

“This has been another positive year demonstrating our ability to execute on all aspects of our strategy to create value,” said chief executive officer Colin Godfrey.

“We are capturing rental growth through our asset management activities, crystallising attractive returns through our disposal programme, and carefully redeploying the proceeds into higher returning opportunities.

“We continue to make good development progress with ongoing rental growth and a more favourable cost environment improving our yield on cost.”

Godfrey said its investment activity complemented its portfolio, adding a range of attractive urban logistics assets as the firm made progress in capturing significant reversionary potential.

“Looking forward, we remain confident in our ability to continue creating value, which is likely to be enhanced by an improving market backdrop.

“With record rental reversion in our portfolio, an attractive development pipeline and strong balance sheet, we are well positioned to deliver further income and capital growth.”

At 0856 GMT, shares in Tritax Big Box were flat at 162.1p.

Reporting by Josh White for Sharecast.com.