Strategic Report
Financial Statements
Additional Information
Governance
Outlook As the UK opened up we saw a bounce in consumer confidence and spending. Subsequently, the war in Ukraine has caused a more uncertain outlook with inflationary pressure and supply chain issues being the immediate result. The war has not had any direct repercussions on the property market to date, however we are mindful of the fact that there could be secondary impacts going forward. Our net zero carbon pathway is in place, and we continue to focus on sustainability and upgrading our buildings to ensure they are attractive to occupiers. We have had success in securing occupiers in all sectors, with industrial demand remaining very strong. Our occupiers remain key and we have long-standing relationships in place with many of them, which enable us to work with and assist businesses as they grow and contract. As at 31 March 2022 the portfolio had £11.1 million of reversionary income potential, £3.6 million from letting the vacant space, £4.5 million from expiring rent free periods and £3.0 million where the passing rent is below market level. Demand for our industrial properties continues to be robust as proven by our high occupancy and growing ERVs. With this sector accounting for 60% of the total portfolio by value, we believe it will continue to contribute strongly to our performance, with supply constraints likely to lead to further rental growth. The majority of office occupiers are now working on a flexible basis, with staff coming into the office two or three days a week. The longer-term implications differ from business to business but we are not seeing a significant reduction in overall floorspace. As we predicted, there has been a flight to quality, with companies wanting to upgrade their space to retain and attract staff. There is now a limited supply of Grade A space, as the development pipeline has slowed over the last two years, and this should result in rental growth. Poor quality buildings are less in demand, with many requiring significant expenditure to incorporate sustainability requirements and make them appealing to occupiers. We expect a significant proportion of these buildings to be repurposed in due course. Retail warehousing, which makes up 65% of our retail allocation, has seen a valuation rebound, with retailers preferring out of town units to the high street. We have succeeded in letting all of our vacant retail warehouse units during the year and our parks are now fully leased. We remain in a strong position with advantageous portfolio weightings, good quality assets and a proven occupier focused approach. Looking forward, we will continue to grow occupancy and income, acquire value accretive assets, engage with our occupiers, and invest further into our properties. Jay Cable Senior Director and Head of Asset Management 25 May 2022
Occupancy has increased during the year from 91% to 93%, reflecting the success of our refurbishment programmes in the office sector. Jay Cable Senior Director and Head of Asset Management £18m Average lot size of the portfolio £10m Invested into the portfolio
Longevity of income As at 31 March 2022, expressed as a percentage of contracted rent, the average length of the leases to the first termination was 4.8 years (2021: 4.9 years). This is summarised as follows: % 0 to 1 year 11.4 1 to 2 years 12.9 2 to 3 years 15.4 3 to 4 years 20.8 4 to 5 years 9.3 5 to 10 years 23.2 10 to 15 years 5.7 15 to 25 years 0.1 25 years and over 1.2 Total 100.0
Picton Property Income Limited Annual Report 2022
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