It is so rare at this stage of the cycle to come across a sector that still offers value and upside and can be bought in size. Everyone is aware of the impact of Amazon on retailing and the big structural shift in demand for logistics from ecommerce. What is less noticeable, but creating an equally large structural change in demand, is the way in which the internet is spawning opportunities for a diverse range of SMEs to operate from multi-let industrial (MLI) space. Suddenly, it makes sense for Deliveroo to set up its own “dark” kitchens in MLI units or for the music shop selling to the local community to take an MLI unit and supply the whole country through its website.
The list of new operators needing dry, simple, cheap, versatile space situated in and around densely-populated towns, is growing daily. At current rents and build costs, developers cannot respond by building more as the economics do not justify it; nor can MLI compete with alternative uses such as residential or leisure where developers can pay higher prices when land is available. So, with demand growing and supply declining, this is the sector to be in, provided the diversity and granularity of the tenant base can be managed. To be effective and overcome these barriers to entry scale and an excellent management platform are vital. Stenprop has both and plans to buy a lot more MLI while investing in innovative technologies to boost efficiencies and improve margins.