Tritax Big Box chief exec calls bottom of warehouse market

Tritax Big Box’s (BBOX) chief executive Colin Godfrey has called the bottom of the warehouse market after the warehouse landlord posted a marginal valuation increase over the six months to 30 June. 

True, pre-tax profit still plunged 78 per cent because the 0.9 per cent bump in net asset value (NAV) over the first half was not as impressive as the 9.6 per cent NAV surge in H1 last year when a speculative bubble had pumped up warehouse values. However, Godfrey said the market had stabilised after last year’s mini-Budget caused warehouse values to plummet. “It looks like the market has bottomed out,” he told Investors’ Chronicle.

He has reason to be bullish. Net rental income climbed 7.68 per cent as tenant demand for warehouse space continues amid a warehouse supply crunch. These fundamentals have helped the sector’s values to outperform retail and office assets. 

The oft-given reason for the continued need for warehouse space is a structural shift from companies that need warehouses for their online delivery capabilities. However, the unanswered question is how deep that demand is and whether a recession will force any of those businesses to change course. The fact that warehouse leasing activity has fallen from its Covid highs should perhaps give warehouse developers and their investors pause for thought.

Still, on balance, we continue to rate Tritax as a company operating in a niche where tenant demand is still driving rental growth and asset values have returned to growth too. The next 12 months could still be difficult, but Tritax is in a much better position than its peers. Buy.

Last IC view: Buy, 148p, 3 March 2003