MLI trading update Q3 FY 2022 shows continued strong leasing momentum

-MLI portfolio increases to 95% with a further six acquisitions over the quarter-

Industrials REIT Limited, the UK multi-let industrial (“MLI”) property company, today publishes a trading update on its MLI portfolio for the period 1 October 2021 to 31 December 2021 and up-to-date information on transactions and rent collection across the Company’s whole portfolio.

Commenting on the trading update Paul Arenson, CEO of Industrials REIT, said:

“Despite the onset of the Omicron variant at the end of 2021, we successfully completed one of the busiest periods for new lettings and renewals in the last quarter. This is the fifth successive quarter that we have achieved average uplifts in rent of more than 20% at lease expiry or renewal, illustrating the continued strength of the MLI market, which remains characterised by affordable rents and low levels of supply. These supportive market dynamics and high levels of portfolio activity have helped us deliver like-for-like growth in passing rents at the top end of our 4-5% per annum target.

“We also had a successful quarter for transactions, adding six further MLI estates to the portfolio with a combined value of over £40 million. All the purchases offer attractive income returns, with potential to create value and grow rents over time utilising our operating platform.

“During the quarter, we also disposed of our penultimate non-MLI asset, taking MLI to 95% of our total portfolio. Our last remaining non-MLI asset in Germany is held for sale, and we look forward to completing our transition shortly, in line with our original target.

“We were pleased to move our London listing to the premium segment of the Main Market of the London Stock Exchange in December, another milestone for the Group which we believe will provide access to a broader universe of potential investors. We are now looking forward to the next chapter for the Company where we plan to scale the business and extract greater performance from our assets through our Industrials Hive operating platform.”

Strong demand continues to drive up rents

• Another strong quarter of leasing activity during which a 22% weighted average uplift on the previous passing rent was recorded on new lettings, as well as a 21% increase on lease renewals, with an average uplift 22% across all leasing transactions (previous quarter: 27% and 17% respectively, averaging 21% across all transactions).
• 31% increase in the total rental value of new leases signed during the quarter to £1.54 million across 43 new lettings and 17 lease renewals over 238,009 sq ft (previous quarter: £1.18 million of new income over 26 new lettings and 27 renewals on 170,081 sq ft). In addition, a further 11 lettings across 22,000 sq ft of space had exchanged by the quarter end (previous quarter: 13 deals over 72,963 sq ft), taking the total amount of space upon which new leases were completed or exchanged to 260,000 sq ft (previous quarter: 243,000 sq ft).
• Rents continue to track towards the top end of expectations, with like-for-like passing rent +0.7% during the quarter and +4.8% over 12 months (previous quarter: 0.0% and +5.0% respectively). Passing rent across the portfolio remains highly affordable at £5.68/sq ft (previous quarter: £5.57/sq ft).
• The reversionary potential in the portfolio continues to grow, with like-for-like Estimated Rental Value (ERV) growth of +8.0% in the 12 months to 31 December 2021, increasing the premium between passing rent and ERV to 13% (previous quarter: +5.1% like-for like growth and a 10.7% premium to passing rent). The growth in ERVs has been bolstered by strong leasing performance at two of the largest assets in the portfolio (Compass Industrial Park, Speke and Dana Trading Estate, Paddock Wood), and by capital investment initiatives at estates in Sheffield, Liverpool and Preston.
• Occupancy across the MLI portfolio remains largely unchanged at 93.8% as at 31 December 2021 (30 September 2021: 93.9%, 30 June 2021: 94.7%, 31 March 2021: 93.7%, 31 December 2020: 93.1%).
• 58% of completed leases were contracted through Industrials REIT’s short-form digital ‘Smart Leases’, whilst 80% of leases signed included at least a 3% annual uplift in rent throughout the term of the lease (previous quarter: 47% of new leases were Smart Leases, whilst 70% of leases signed contained 3% fixed uplifts).

A healthy pipeline of lettings

• A record pipeline of new lettings and renewals under offer at the start of 2022 across 91 transactions and over 500 000 sq ft of space (previous quarter: 86 transactions over 415,980 sq ft of space). Of this, 283,000 sq ft related to new lettings and 235,000 sq ft to existing customers renewing their lease (previous quarter: 254,814 sq ft and 161,166 sq ft respectively).
• Industrials.co.uk website visitors were unchanged over the quarter (previous quarter: -9%) and up 6.1% year on year.
• Leasing enquiries were 20% lower compared to the previous quarter (previous quarter: +0.5%), due to the Christmas period. However, enquiries were up 8.6% when compared to the same period in 2020, whilst average weekly enquiries for the whole of 2021 were 45% higher than in 2020.

News in full

Below is a link to the Trading Update Webinar for Q3 FY2022