The io Centre, Jugglers Close, Banbury
Purchase price: £1.35m
Yield: 9.5%
The Brief
The client is an overseas investor with an off-shore structure in place to purchase UK commercial property. Their interest lies in South East investments that nevertheless offer an attractive return.
The Property
The building constitutes a modern industrial unit of 23,550 sq ft in a development of 7 units. The property is located on the established Wildmere Industrial Estate to the North East of the town centre at Junction 11 of the M40. The tenant is an established international logistics firm and at the time of purchase they had a little over 5 years remaining on their lease term.
The Deal
The vendor was seeking £1.415m which would have shown a net initial yield of 9%. Though this was a yield that local comparable assets had been sold for in the recent past we had to consider the relatively short term left on the occupational lease. With this in mind we were able to secure a deal at £1.35m, a 9.5% net initial yield and a saving for our client of £65,000.
The Challenges
Banbury is a good industrial location in that it is situated on the London to Birmingham link road, the M40. The difficulty in finding value in South East location is that there is that if the return is good, there is always going to be an element of risk inherent in the asset; in this instance it was the short time (5 years) left on the lease.
On pre-acquisition inspections we had to make an assessment of the tenant’s long-term commitment to the property. While it suited their requirements for the time being it was clear they were beginning to out-grow the unit. What gave us and ultimately our clients’ comfort, was that we learnt they were intending to install a mezzanine to increase their capacity. We also analysed the local market and established there was very little similar stock that they (or anyone else) could move to in the area. Ultimately if the tenant moves out, such is the lack of supply in the Banbury market for modern industrial units with high eaves and at circa 20,000 sq ft, we would have every confidence about finding a suitable replacement.
The combination of these factors meant that at 9.5% we believe this to be a good deal and were able to secure it for our client.
Market
Update
January 2020: A Clear Vision for 2020 (148k PDF)
January 2019: UK Commercial Property – Heading into 2019 (151k PDF)
January 2018: Commercial property predictions for 2018 (260k PDF)
January 2017: Political landscape continues
to impact on UK Commercial Property
(not necessarily in a bad way). (260k PDF)