How to cash in on the UK warehouse boom

TAKING advantage of the rise of online shopping, fund managers are going on a spending spree of their own – but they’re buying up warehouses.

The growing trend towards e-commerce has created intense demand for huge warehouses from which retailers can ship their goods.

Companies need an efficient network if they are to be able to offer customers speedy delivery of their favourite items.

Nathan Sweeney, senior investment manager at Architas, says: ‘Any company selling their goods online wants a warehouse, and the bigger the better.’ These so-called mega sheds need to be in great locations with excellent transport links, close to large cities. The main hub needs to be able to access most of the UK within a certain time frame and then smaller, satellite locations are needed to get items to customers faster as same- day and one- day deliveries become increasingly popular.

But internet giants such as Amazon and Currys don’t want to build their own so they rent them for long periods from specialist companies, which benefit from the rise in the value of the warehouse and the steady rental income received from the tenant.

And while many property funds have a proportion of their cash invested in these assets, Sweeney likes Tritax Big Box, which specialises in this type of real estate.

Tritax, which yields around 4.3pc, is so in demand that its shares currently trade at a premium of 11pc.

Veteran investor Neil Woodford has also revealed he is tapping into the trend. The fund manager invested in Warehouse Real Estate Investment Trust when it floated on the stock exchange in September. Warehouse’s buildings are, on average, just one mile from city centres or major highways. It aims for a dividend yield of 5.5pc.

At a time when demand for commercial property and office space is faltering because of Brexit uncertainty, e-commerce is only becoming more important. One of the major drivers of this trend is the fact that retailers cannot ignore it.

Tom Walker, manager of the Schroder Global Cities Real Estate fund, says: ‘The retailers which are going to be the winners of the future are those which embrace an omnichannel approach where they use their stores as adverts for their products and customers come to look and then go home and order online.’

And Jonathan Holland, manager of the L&G Industrial Property investment fund, says it’s not just the healthy dividends which make warehouses attractive investments. MEGA-

SHEDS and the land they’re built on have the potential to rapidly rise in value too. They are expected to grow around 6pc a year over the next five years.

As well as that, a shortage of supply in areas such as London has seen some rents double over the past five years.

And this trend is not just shaking up retail in the UK. Schroders’ Walker likes Australian logistics specialists Goodman Group and Californian real-estate firm Rexwood. Walker says: ‘ People think of property as quite a safe, sleepy asset but the effect e- commerce is having is huge.’