UK acquisitions could boost Ascendas REIT

The shift towards online retail sales works to the advantage of logistics take-up.

Despite the Brexit-related risks, the logistics sector is a bit more sheltered compared to the office and retail sub-sectors as logistics is linked to domestic consumption and is pushed by robust demand and constrained supply, Jefferies analyst Krishna Guha said. With this, the 26 UK logistics acquisitions could uplift Ascendas Real Estate Investment Trust (AREIT).

Moreover, the logistics sector could continue to benefit from the structural shift towards online retail sales, Guha said. Average logistics take-up climbed to about 20% between 2015 and 2017 from approximately 7% between 2009 to 2013.

In terms of currency, the UK pound has depreciated about 33% against SGD over the last 10 years, suggesting better entry opportunity and pricing in some of the Brexit-related risks, the analyst noted.

“These transactions are likely to help the REIT build a network which can help in deal sourcing and capital recycling in future,” Guha noted.

According to Cushman and Wakefield, prime yields for logistics assets in UK were stable at 5.2% as of Q2.

With a total gross internal area of 266,184 sq m, the 26 logistics properties acquired by the firm are located in established industrial areas within the West Midlands, North West England, South East England and Yorkshire and the Humber. All have a full occupancy rate and a long WALE of 9.1 years.