Londonmetric recently shared insights that paint a detailed picture of the current commercial property market and what it means for investors.
In the first half of the fiscal year, Londonmetric reported a notable increase in net rental income, rising from £72.1m to £76.9m. This is a positive indicator, especially considering the tumultuous economic environment. The company’s portfolio, valued at £3.2 billion, maintained a remarkable 99% occupancy rate. This high occupancy, combined with an average lease term of 11 years, suggests a stable and robust demand for logistics spaces.
Strategic Moves and Financial Highlights
Londonmetric has been strategically active, making significant disposals worth £157 million. These included the sale of four offices and two long income assets, which collectively fetched £24.5m in November. Such moves indicate a keen focus on optimizing the portfolio and reinvesting in more lucrative opportunities.
The company also adjusted its dividend, moving from 4.8p to 4.3p, a decision reflecting both market conditions and the firm’s financial strategy. Moreover, there was a slight increase in EPRA net tangible asset value per share, from 198.9p to 199.6p.
Market Insights from Chief Andrew Jones
Andrew Jones, the Chief of Londonmetric, provided valuable insights into the firm’s approach during these challenging times. He highlighted the company’s focus on selling mature and non-core assets while staying vigilant for mispriced quality opportunities in the real estate and stock markets.
The State of UK Property Market Liquidity
One of the critical issues addressed by Jones was the liquidity in the UK property market. He pointed out that while there has been an improvement since the mini-budget of the previous year, the market is still far from normal. A significant factor in this scenario is the five-year swap rate, which, although decreased from its peak of 540bps, is still higher than desired for normal market functioning. The current rate stands at 415bps, down from 400bps at the time of the last report.
Jones anticipates a positive shift in liquidity with the growing assumption that base rates, having peaked at 5.25%, will start to decline in 2024. This expectation could bring much-needed relief and stability to the market.