Governance
Financial Statements
Additional Information
Strategic Report
Looking ahead
Demand for our multi-let industrial properties continues to be good as proven by our high occupancy, significant rental growth over the year and growing ERVs. Our distribution portfolio remains fully let. With industrial accounting for 59% of the total portfolio by value, we believe it will contribute to our performance, with supply constraints and high building costs likely to lead to further rental growth. Each office building has to be viewed on its own merits, with the majority of our buildings offering strong fundamentals in terms of amenities, natural light, adaptable floor plates and above average car parking facilities. Our strategy to reduce office exposure, where we believe there is a lack of occupational demand and a higher value alternative use can be created, is successfully moving forward with two sales exchanged and further potential opportunities identified. The retail sector is now seeing some stability, despite recent retailer closures, for example The Body Shop and Wilko, however, value retailers are taking a lot of the space becoming available. The sector provides an attractive yield and buying opportunities for best-in-class stock. The portfolio remains well-placed and of a high quality, enabling us to maintain and enhance income through our proven occupier focused approach. Our focus is on reducing office exposure, which will enable higher occupancy, and improving the overall portfolio income through reinvestment and refurbishment. Jay Cable Head of Asset Management
Outlook The sharp yield correction in 2022/23 caused a widespread repricing of commercial property, but we are now seeing values stabilise and indeed some are increasing. Occupational markets on the whole have continued to remain positive even when values were falling. With interest rates predicted to reduce in the second half of 2024, we can see values rising for prime properties in all three sectors we are invested in. The quality of our portfolio, which has benefited from significant investment in respect of refurbishments and sustainability upgrades in recent years, means that we have future-proofed properties that are attractive to occupiers.
Our occupiers remain our key focus and we have long-standing relationships with many of them, which enable us to work with and assist businesses as they grow and contract. As at 31 March 2024, the portfolio had £12.8 million of reversionary income potential; £5.3 million from letting the vacant space, £3.9 million from expiring rent-free periods or stepped rents and £3.6 million where the rent is below market level. There is a wide disparity in performance across the sectors and it comes back to a building’s fundamentals and micro-location. Good quality, well-located real estate will attract occupiers, but secondary assets will remain in less demand. The quality of the portfolio combined with sector weightings are critical to outperformance.
The portfolio remains well-placed and of a high quality, enabling us to maintain and enhance income through our proven occupier focused approach. Jay Cable Head of Asset Management
Picton Property Income Limited / Annual Report 2024
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