Warehouse REIT has agreed to acquire Bradwell Abbey Industrial Estate for £62 million, reflects a net initial yield of 4%.
The multi-let industrial estate totals 69 units across c. 335,000 sq ft, ranging from c. 1,000 to 15,000 sq ft in size. It is located just off the A5, providing fast access to the surrounding population of Milton Keynes and the wider motorway network, with the M1 being six miles to the East.
The estate is currently 96% leased to a range of occupiers including Argos, F&F Stores and Taylor Kerr Engineering Ltd and produces a total annual income (including some rental guarantees) of over £2.6 million. The low average rent of c. £7.80 psf offers good reversionary potential, considering that prime rents in the area range from £10 to £14 per psf.
Milton Keynes is a highly sought-after industrial location, with vacancy sitting at c. 4%. Significant residential growth is putting further pressure on demand and underpinning land values, providing further rental growth potential.
Andrew Bird, Managing Director of the Investment Advisor, Tilstone Partners Limited, commented: “This acquisition, provides Warehouse REIT with clear opportunities to generate upside through strategic capital expenditure and working with the existing occupiers. We intend to refurbish units as they become available, improving the estate’s sustainability credentials, enabling us to capture new rental levels which will help drive future rents across the estate and strengthen the covenant profile.
“Located in one of Warehouse REIT’s favoured locations, the Oxford-Cambridge Arc’s industrial markets are characterised by an acute supply demand imbalance, driven by the growing dual demand from both industrial and science and technology occupiers. With supply failing to keep up with record levels of take up, land values have increased rapidly and strong rental growth is forecast.”
The transaction continues Warehouse REIT’s stated aim of increasing its holding in the Arc, with Milton Keynes central to this strategy, as a result of it being one of the premier distribution and industrial locations in the UK.
Following this acquisition, over 20% of Warehouse REIT’s portfolio is in the Arc, which will increase further upon completion of two ongoing development projects in the Oxford and Cambridge areas.