UK Commercial Property REIT moves focus

Capital recycling in the six months to June, notably towards the industrial sector and away from retail, saw the portfolio deliver a total return of 4.7 per cent against the IPD benchmark return of 4 per cent. Industrial assets, which now account for 37 per cent of the portfolio, delivered a total return of 10.2 per cent.

An example of the company’s portfolio strategy came at the end of June when it bought The White Building in Reading for around £51m. Recently refurbished, this is expected to generate annual rental income of around £3m once fully let, and has strong reversionary potential. The purchase was part-financed by the sale of an office in Bristol for £26.6m where it considered that future returns would be affected by anticipated capital expenditure requirements.

Offices make up just over a fifth of the portfolio and also performed well, generating a return of 5.3 per cent. And despite the gloom and uncertainty, investor demand and leasing activity remained strong in central London, although rents there are showing a modest decline. However, investment in the City is only 2 per cent of the portfolio, with most of the exposure in the West End.