Tritax Big Box (BBOX ) has snapped up an urban logistics park for £58.5m outside Birmingham as it takes advantage of a stabilisation in industrial properties after the slump last year caused by rising interest rates.

The £2.7bn large warehouse investor has bought Junction 6 Industrial Park, a 384,000 square-foot site three miles outside Birmingham.

Colin Godfrey, chief executive of the trust, said that the high-quality assets would ‘broaden our customer offer, and provide additional asset management opportunities to drive income growth’.

The park has an average passing rent of £7.30 per square foot versus a £10.90 per square foot estimated rental value. The net initial yield is 4.5% with a ‘significant near-term income growth opportunity reflected in a 6.7% reversionary yield’, said Godfrey.

Tritax Big Box is aiming to dispose of between £100m and £200m of assets this year, in addition to the £150m it has already sold at a blended initial yield of 4.6%. The money made from the disposals will be recycled into higher-yielding opportunities.

‘We continue to make positive progress delivering our strategy despite a more challenging economic backdrop,’ Godfrey said.

While valuations have taken a hit, occupational demand has remained strong in ‘big box’ warehousing and Godfrey said he is ‘successfully converting customer requirements into new lettings’, having added £4.1m to the annual contracted rent in the first four months of the calendar year via the development of 500,000 square feet of lettings. The trust also secured 900,000 square feet of new planning consents.

The good news for investors is that commercial property prices are now stabilising following the steep sell-off last year, although Godfrey said ‘economic and capital market uncertainty contributed to investment transactional activity remaining low in the first quarter of 2023’.

‘However, there are increasing signs of stabilisation in pricing,’ he said, adding that prime headline rents have increased across all regions, typically by 2-3%.

Tritax Big Box shares have slumped 24% in the past year but have gained 9% this year as sentiment towards formerly highly-rated warehouse assets revives. From a low after last November’s chaotic mini-Budget, the 5%-yielding shares have narrowed their discount from 43% to 15%. 

Shore Capital analyst Andrew Saunders reiterated his ‘buy’ recommendation following the trading update, stating that the share price ‘looks to offer attractive long-term value’.

He said the large discount shows the ‘stock market [is] factoring in a further, and unlikely, 12% fall in the value of the investment and development portfolio in full-year 2023, coming after a 15% like-for-like fall in full-year 2022’.

‘This is somewhat inconsistent with the stable prices of assets that are currently changing hands in the real world,’ said Saunders.