Hansteen upbeat as vacancy rates reduce

UK and continental Europe property investment company Hansteen Holdings announced a portfolio update for the period from 1 July to 30 November on Monday.

The FTSE 250 firm said during the period, it completed 836 new leases or lease renewals for more than 4.3 million sq ft of space, securing annualised income of £16.6 million.

It said the vacancy rate reported in the interim accounts at 30 June of 5.3 million sq ft, or 12.9% of the portfolio, had been reduced to 4.2 million sq ft, or 10.2% of the portfolio, at the end of November.

In the UK, the vacancy at 30 June 2016 was 1.7 million sq ft, or 10.5%, and at the end of the period stood at 1.4 million sq ft, or 9.0%.

“Our seven UK regional offices have all enjoyed growth in enquiries and demand,” the board said in its statement.

“The Yorkshire and Wales regions have performed well, improving their vacancy rates from 12.6% and 14.0% respectively at 30 June 2016 to 9.7% and 9.8% today.

“Scotland has also performed well, and the 600,000 sq ft, 155-unit portfolio in East Kilbride, a former Scottish new town, became fully let at the end of October for the first time since being sold by the Scottish New Towns Development Corporations in the early 1990s.”

In addition to a reduction in voids, all of the company’s UK regions were experiencing pockets of rental growth and shorter incentives being offered to tenants as demand intensified, particularly at estates where voids are zero or close to zero.

“We have a relatively short weighted average unexpired lease term which allows this rental growth to be achieved relatively quickly.

“We believe this trend will continue as demand remains high and no competing supply is coming through.”

The picture on the continent was similar to that in the UK, the board said, with both the German and Benelux regions performing well occupationally since the half year with a combined 900,000 sq ft reduction in the vacancy rate to 10.9% at the end of November.

Current forecasts suggested that the year will see record low vacancy levels across Europe with occupational demand outstripping supply in most submarkets, it explained.

“In Germany, there is evidence that rental growth is starting to emerge.

“Tenant letting and renewal incentives have been reducing for some time on assets that are well located to service urban conurbations and, where there is a lack of available supply, rental levels are moving forward.”

Hansteen said an example of that is at its Motzener Strasse asset, which was purchased in February 2013 with a passing rent of €3.52/sq m.

“The main tenant vacated the warehouse later in 2013 and the space has recently been part relet to Rewe Digital for its online food retailing service and to Deutsche Bahn for document storage at rents of €4.50/sq m and €4.19/sq m respectively.”

The board said that although the Dutch market is further behind in terms of rental growth, the occupier markets continued to gather momentum and there is expectation that supply will reduce in 2017.

On the investment front, following the summer hiatus and the Brexit vote on 23 June, the board said capital markets returned strongly with material capital looking for asset-backed income.

It said there has been a marked increase in investor appetite for its types of multi-let, light industrial assets from both overseas and national investors.

“The light industrial sector is benefiting from the shift towards online retailing, by providing flexible, low cost space that is well placed to service urban areas, and investors are looking to access this markets,” said joint chief executives Morgan Jones and Ian Watson.

“As the demand from occupiers and investors grows in our European markets, our platform is well placed to capitalise through letting, selling and recycling capital.

“Our fully-internalised management team allows us to convert new occupiers quickly as rents move forward, and to identify, purchase and deliver new value-add opportunities.”