Urban Logistics REIT – A re-rating candidate

If an inflexion point in the rates cycle has been reached, as seems to be the case, Urban Logistics REIT (SHED) appears to be an attractive proposition. Valuations look to have stabilised – as evidenced by a 0.2% uplift in the value of its portfolio in the six months to September 2023 – while the company says that it has rental reversion baked into its portfolio.

SHED’s manager has a track record of creating value through asset management initiatives, and says that it will continue to be a focus for the company as it builds on the success of recent lease events that resulted in a 10% uplift in rents. Operating in the ‘mid-box’ segment of the logistics sector – where the manager says that strong rental growth is forecast, and supply and demand characteristics remain favourable – would appear to give it an advantage over both the wider real estate sector and some of its closest peers.

SHED’s current discount of 23.5% could be attractive, especially if the next move in interest rates is down.