Tritax Big Box generated an additional £22.7mn (2023: £12.7mn) rental income from annual rent reviews and new developments over 2024.
£306mn of assets were disposed of across the year, generating a 2.8% premium to the fair value at acquisition. The disposals included £181.2mn non-core assets acquired through the merger with UK Commercial Property REIT in the first half.
Vacancy rates rose from 2.5% to 5.7%, largely due to developments completed in late November contributing 2.4 percentage points. These new developments have to potential to add £21.5mn of additional annual rental income.
The loan-to-value, a measure of financial strength, has improved from 32% to 29%. The group has access to more than £500mn of liquidity, with a 4.5-year average maturity on its debt.
The shares were broadly flat in early trading.
Our view
Tritax’s full-year trading update didn’t spring any surprises. At its core, Tritax Big Box generates income through renting out large warehouses, or 'Big Boxes', which are central to modern logistics and e-commerce. But the strategy is slowly shifting toward smaller, urban, logistics centres that offer better yields.
The acquisition of UK Commercial Property REIT (UKCM) offers some complementary assets, at both the large and small end of the size scale. There was continued progress on UKCM assets that don’t quite fit with the long-term strategy, with asset sales picking up over the second half as expected. That capital is set to be reinvested into potentially high-yielding new developments like the recently announced energy and datacentre project, which we think looks attractive – something to watch.
Despite an uncertain market backdrop, rents got a helpful boost from new developments coming online and rent reviews. These were snapped up by Tritax’s customers as building a strong logistics network is non-negotiable in this day and age.
Once Tritax rents out a site, it's a long-term source of income. Tenants build up distribution networks around the site, making changing location costly, risky and time-consuming. Some have even sought to extend leases many years before their scheduled expiration, so determined are they to retain the use of the facility.
Highly desirable assets mean attractive deal terms, such as upwards-only rent reviews, which are helping boost income. A wide range of high-quality tenants should hopefully add some more security to the dividend, while further expansion could lead to increasing payouts. Real estate investment trusts (REIT), like Tritax, must pay out the majority of rental profits to investors.
Development is a key focus capturing the increased demand for e-commerce and the distribution needs that follow. A shortage of ready-to-occupy premises means customers have been snapping up units before they've been completed. But it's expensive to get a logistics hub up and running, and if it doesn't get filled, it could become a financial headache.
Paying out rental income makes expansion complicated, too. Tritax is having to recycle its portfolio - selling lower-yielding mature assets in order to invest in higher-yielding development opportunities. Against an improving market backdrop, activity here is picking up which helps give options.
With rate interest cuts now underway in the UK, the improving climate has helped investor sentiment to recover. However, the group still trades at a discount to its longer-term average. We continue to believe this could present an attractive entry point for those willing to ride short-term uncertainty. As with any investment, there are no guarantees.
Tritax Big Box key facts
All ratios are sourced from Refinitiv, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
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