Portfolio Review continued
Proactive
management
Throughout the year we have continued to engage with our occupiers, invested into our assets and driven forward our sustainability priorities, which is at the forefront of our thinking as we actively manage the portfolio. Driven by significant investor and occupier demand in the industrial sector, combined with a rebound in the retail warehousing sector, we have seen strong valuation gains. We have had like-for-like increases in passing rent and estimated rental value (ERV). It has been another busy year in terms of the portfolio, with 76 asset management transactions completed. Our repositioning programme has especially helped us secure new office occupiers seeking best in class space, and this has resulted in an increase in occupancy over the period to 93%, up from 91% in the prior year. Our occupier focused approach has always been key to enabling us to actively manage the portfolio. We are guided by our Picton Promise of Action, Community, Technology, Support and Sustainability. This philosophy of working in collaboration with our occupiers is a significant contributor to our long-term track record of outperformance. During the year we have launched SwiftSpace at several of our office buildings, this initiative recognises that flexibility and ease of occupation are particularly important for some smaller businesses, and we are offering bespoke leasing solutions to include fitted space, inclusive rents and flexibility. Performance Our portfolio comprises 47 assets, with around 400 occupiers, and is valued at £849 million with a net initial yield of 4.0% and a reversionary yield of 5.4%.
Our asset allocation, with 60% in industrial, 30% in office and 10% in retail and leisure, combined with increasing occupancy and transactional activity, has enabled us to outperform the MSCI UK Quarterly Property Index over the year. Overall, the like-for-like valuation was up 21%, with the industrial sector up 34%, offices up by 2% and retail and leisure up by 17%. This compares with the MSCI UK Quarterly Property Index recording a capital value increase of 15% over the period. The overall portfolio passing rent is £38.7 million, an increase from the prior year of £2.2 million. On a like-for- like basis the passing rent increased by 2% and the contracted rent, which is the gross rent receivable after lease incentives, increased by £2.7 million or 7%. The March 2022 ERV of the portfolio is £49.8 million, an increase from the prior year of 5% on a like-for-like basis. We had positive growth in all three sectors, with the industrial sector increasing 11% and the other two sectors both up 1%. We have set out below the principal activity in each of the sectors in which we are invested and believe our sector strategy and proactive occupier engagement has delivered positive performance this year. The industrial sector has had a very strong year, with considerable investment demand, with multiple buyers for well-located assets, resulting in further price growth. A lack of supply, especially of multi-let estates, coupled with increasing build costs, means that occupiers have restricted choice when looking for a unit, which in turn has driven strong rental growth across the country and especially in London and the South East where 73% of our portfolio is located. As examples, the ERV at Datapoint, London increased by 26%, Lyon Business Park, Barking by 15% and River Way, Harlow by 11%. The office sector is returning to a ‘new normal’ with building occupancy improving, albeit on a more flexible basis. Increasingly businesses are focused on providing best in class space for their employees with good sustainability characteristics. There is good demand for Grade A space with take-up almost at pre-pandemic levels, but poorer quality buildings are struggling to attract occupiers.
Picton Property Income Limited Annual Report 2022
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