Looking ahead Outlook The sharp yield correction in 2022 has caused a repricing of commercial
rents and £3.0 million where the rent is below market level. This is significant and is our focus for the coming year. Demand for our industrial properties continues to be resilient as proven by our high occupancy and growing ERVs. With this sector accounting for 57% of the total portfolio by value, we believe it will contribute to our performance off rebased values that are now stable, with supply constraints and high building costs likely to lead to further rental growth. Many of our office buildings have had investment into them in recent years, to upgrade space, create occupier amenities and improve their sustainability credentials. Our best-in- class offices are attracting and retaining occupiers; however, where we do have higher vacancy rates, we are exploring higher value alternative uses, including residential conversion at two central London properties. The sector is going through an adjustment, and we will look to reduce exposure through change of use and selective sales.
The retail and leisure sector has recovered following the pandemic, but there are still headwinds in respect of an oversupply of floor space and a cost of living crisis impacting disposable income. By virtue of the marked repricing in this sector in prior years we believe there are opportunities in the sector for selective acquisitions. The portfolio is well placed and of a high quality, enabling us to maintain and enhance income through our proven occupier focused approach. Looking forward, our focus is on growing occupancy and improving the overall portfolio quality through selective disposals, reinvestment and refurbishments to improve the sustainability credentials of our assets. Jay Cable Head of Asset Management
property, but we are now seeing values stabilise, creating potential opportunities in some sectors. 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 started to future-proof properties to ensure that they are attractive to occupiers. Our net zero carbon pathway is in place, and we will continue to invest in the improvement of our buildings. 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 2023 the portfolio had £12.5 million of reversionary income potential; £5.3 million from letting the vacant space, £4.2 million from expiring rent-free periods or stepped
Picton Property Income Limited Annual Report 2023
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