Hansteen Holdings (LSE: HSTN), the UK and Continental European property investment company, announces a portfolio update for the period 1 July to 31 November 2016.
- 836 lettings and lease renewals for more than 4.3 million sq ft (400,000 sq m), securing annualised income of £16.6 million; further deals in pipeline
- Vacancy reduced to 4.2 million sq ft (390,000 sq m) or 10.2% (30 June 2016: 5.3 million sq ft or 12.9%)
- Rental growth emerging in UK and Germany
- Increased investor appetite for multi-let light industrial property across the European markets from both national and international investors
For further information:
Ian Watson / Morgan Jones Jeremy Carey / Kirsty Allan
Hansteen Holdings PLC Tavistock
Tel: 020 7408 7000 Tel: 020 7920 3150
We have completed 836 new leases or lease renewals for more than 4.3 million sq ft (400,000 sq m) of space from 1 July to 30 November 2016, securing annualised income of £16.6 million. The vacancy rate reported in the interim accounts at 30 June 2016 of 5.3 million sq ft (496,000 sq m), or 12.9% of the portfolio, had been reduced to 4.2 million sq ft (390,000 sq m), or 10.2% of the portfolio, at the end of November 2016. Further deals are in the pipeline, which should reduce the vacancy rate further by the year end.
In the UK, the vacancy at 30 June 2016 was 1.7 million sq ft (157,000 sq m), or 10.5%, and today stands at 1.4 million sq ft (134,000 sq m), or 9.0% showing the strength of the UK occupational market post the Brexit vote on 23 June.
Our seven UK regional offices have all enjoyed growth in enquiries and demand. The Yorkshire and Wales regions have performed well, improving their vacancy rates from 12.6% and 14.0% respectively at 30 June 2016 to 9.7% and 9.8% today. Scotland has also performed well, and the 600,000 sq ft (56,000 sq m), 155-unit portfolio in East Kilbride, a former Scottish new town, became fully let at the end of October for the first time since being sold by the Scottish New Towns Development Corporations in the early 1990s.
In addition to a reduction in voids all regions are experiencing pockets of rental growth and shorter incentives being offered to tenants as demand intensifies, particularly at estates where voids are zero or close to zero. We have a relatively short weighted average unexpired lease term (WAULT) which allows this rental growth to be achieved relatively quickly. We believe this trend will continue as demand remains high and no competing supply is coming through.
The picture across our Continental European markets is similar to that in the UK. Both the German and Benelux regions have performed well occupationally since the half year with a combined 900,000 sq ft (84,000 sq m) reduction in the vacancy rate to 10.9% at the end of November. Current forecasts suggest that this year will see record low vacancy levels across Europe with occupational demand outstripping supply in most sub markets.
In Germany, there is evidence that rental growth is starting to emerge. Tenant letting and renewal incentives have been reducing for some time on assets that are well located to service urban conurbations and, where there is a lack of available supply, rental levels are moving forward. An example of this is at our Motzener Strasse asset, which was purchased in February 2013 with a passing rent of €3.52/sq m. The main tenant vacated the warehouse later in 2013 and the space has recently been part relet to Rewe Digital for its online food retailing service and to Deutsche Bahn for document storage at rents of €4.50/sq m and €4.19/sq m respectively.
Although the Dutch market is further behind in terms of rental growth, the occupier markets continue to gather momentum and there is expectation that supply will reduce in 2017.
Following the summer hiatus and the Brexit vote on 23 June, the capital markets have come back strongly with material capital looking for asset-backed income. There has been a marked increase in investor appetite for our types of multi-let, light industrial assets from both overseas and national investors.
Morgan Jones and Ian Watson, joint Chief Executives, commented: “The light industrial sector is benefiting from the shift towards online retailing, by providing flexible, low cost space that is well placed to service urban areas, and investors are looking to access this markets. As the demand from occupiers and investors grows in our European markets, our platform is well placed to capitalise through letting, selling and recycling capital. Our fully-internalised management team allows us to convert new occupiers quickly as rents move forward, and to identify, purchase and deliver new value-add opportunities”.