Clicks and mortar

While much of the commercial property market has suffered during the pandemic, demand for warehouse properties among tenants and investors has remained resilient. This demand has been bolstered by a surge in online sales since lockdown, with Amazon deliveries and online groceries becoming a lifeline for many.

The Association of Investment Companies (AIC) has spoken to the managers of investment companies in the Property – UK Commercial and Property – Europe sectors with holdings in warehouse properties to ask their views on the future of online retail and which regions and sectors have been the winners and losers of the pandemic.

Performance of investment companies with holdings in warehouse properties


AIC sector

Share price total return (%)

Performance from





Performance to







6 months

1 year

3 years


Aberdeen Standard European Logistics Income

Property - Europe




Tritax EuroBox

Property - Europe




AIC sector average

Property - Europe






Property - UK Commercial




Tritax Big Box REIT

Property - UK Commercial




Urban Logistics REIT

Property - UK Commercial




Warehouse REIT

Property - UK Commercial




AIC sector average

Property - UK Commercial




Source: AIC/Morningstar. AIC sector averages are for whole AIC sector, not just companies shown in table.

The shift to online

Andrew Bird, Managing Director of Tilstone Partners, the manager of Warehouse REIT, said: “The online shift is here to stay. The number of customers using internet shopping has increased, the amount each one spends has increased and the convenience has proved a saviour for so many. Combined with a likelihood of many people working from home part of the week, and therefore perhaps having less opportunity to visit the high street during lunchtime, our national commitment to online buying is here to stay and probably accounts for around 30% of market share.”

Richard Moffitt, Chief Executive of Urban Logistics REIT, said: “January saw 19% of all retail sales conducted online. By March this was more than 30% in comparison to research which predicted it would reach 25% by the end of 2022. The progression is here to stay, but perhaps at a more modest level. Groceries at 10-12% online have a long way to go, but it is hard for retailers to maintain margin.”

Colin Godfrey, CEO of Fund Management at Tritax Big Box, said: “UK online penetration peaked at 33.5% in May, reflecting the shift in consumer behaviour as non-essential physical stores were closed. From June to August this online penetration level has moderated and now stands at 28.1%. This change is a reflection of consumers starting to regain confidence and returning to shopping in physical stores, rather than a sharp slowdown in online sales. Online spending continues to be robust with year-on-year online sales growth remaining above 50% despite more people shopping at physical locations.”

Opportunities in the pandemic

Laura Elkin, Portfolio Manager of AEW UK REIT, said: “Trends such as online shopping, which have accelerated during the pandemic, have provided an additional boost to tenant demand in what was already an undersupplied market and as a result we have seen increased appetite from occupiers. For example, in May we were able to sell the largest industrial asset within the AEW UK REIT portfolio to an owner occupier for a value 25% ahead of its previous valuation.”

Nick Preston, Partner and Fund Manager of Tritax EuroBox, said: “The pandemic has highlighted the fragility of supply chains, with the realisation that supply chains must not only be efficient but also resilient to supply side shocks. It has also highlighted the reliance on humans working in them, whilst also emphasising the value of automation, which increases efficiency, resilience and flexibility to meet demand. Social issues and social value moved up the agenda, with increasing recognition of non-financial risks such as wellbeing of staff.”

Evert Castelein, Manager of Aberdeen Standard European Logistics Income, said: “As a sector, European logistics has outperformed most other European real estate sectors, benefitting from the shift to working from home and the social distancing rules. Strong growth in e-commerce and the restructuring of supply chains are key drivers supporting the demand for logistics warehouse space, which is increasingly becoming a favoured asset class among investors.”

Andrew Bird, Managing Director of Tilstone Partners, the manager of Warehouse REIT, said: “There has been strong buying demand for pandemic-proof income. Amazon’s covenant is becoming increasingly valuable, not only in the UK but across Europe, with yields below 4% being paid and becoming the norm. This is a trend we would expect to continue. There is also strong investment demand from both domestic and overseas investors. If the Brexit negotiations generate any weakness in sterling, this overseas demand would surely accelerate further.”

Winners and losers

Colin Godfrey, CEO of Fund Management at Tritax Big Box, said: “Unsurprisingly, online retail has been the standout winner, underpinned by a number of key categories. The real winners have been the beauty sector, which saw a rise of nearly 140% in the first week of April, while electricals rose 90%, and home and garden rose 70%. In contrast, clothing saw online sales drop 20% year on year and it has been a challenging time for car manufacturers. Amazon has also delivered record sales this year. The alcohol category saw a significant rise in online demand following the coronavirus lockdown. Naked Wines is one brand benefitting; it has forecast a £200 million rise in revenue for 2020 and is expected to invest between £20 million and £25 million on new customer recruitment.”

Richard Moffitt, Chief Executive of Urban Logistics REIT, said: “We saw 62 of our 64 buildings operational during the first two to three weeks of lockdown and then all 64 operated normally. Rather than regional variations, it is tenant covenants, unit sizes and user types which are more important.”

Nick Preston, Partner and Fund Manager of Tritax EuroBox, said: “As in the UK, the demand for modern logistics space is closely correlated to the growth in e-commerce which, in turn, has a direct correlation to demand. This surge in e-commerce adoption has further driven the demand for assets located within close proximity to dense population centres and infrastructure. In particular, it has resulted in strong demand for mega boxes (40,000 square metres plus), which provide affordable, flexible and efficient space, where occupiers capitalise on the cubic space, not just the floor area. Efficiency gains are driven by the economies of scale that are achieved, as well as the fact that these larger assets can accommodate the increasingly important automation.”

Andrew Bird, Managing Director of Tilstone Partners, the manager of Warehouse REIT, said: “The occupier demand for warehouse space has remained robust across all sub-markets and unit sizes. All online focused businesses have been the winners as have those logistics companies that serve the sector. This has seen increased demand for big box space as well as mid box. The annual take-up statistics for 2020 are anticipated to exceed those of last year, albeit Amazon has again become a materially significant contributor. The very small starter workshop units have had mixed fortunes depending upon the market segment of the operator and whether it has been able to operate through the lockdown.”

Laura Elkin, Portfolio Manager of AEW UK REIT, said: “The AEW UK REIT portfolio is focused on secondary industrial properties, most of which are unsheltered by the long leases typical of newer prime logistics property. This enables us to have more regular value adding discussions with our tenants, a number of which have continued to take place throughout the course of the pandemic. We have found that, due to the ongoing strength of demand in the warehousing market, we have still been able to create significant value in this part of our portfolio at the time of lease renewal by increasing rents and lengthening income streams.”

Rent collection

Evert Castelein, Manager of Aberdeen Standard European Logistics Income, said: “Our on-the-ground presence across Europe ensures that we are close to tenants and have an excellent ongoing understanding of their business operations. The relationships we have built with tenants, coupled with a deep understanding of their local logistics markets, ensured that all tenant discussions were highly productive from the start.

“Following these discussions, we agreed on six rent deferrals and seven rent-free periods in exchange for material lease extensions resulting in a total rent collection of 100% in Q1, 85% in Q2 and 96% in Q3 as at mid-September. All rents due under the terms of these agreements have been paid on time and no new requests have been made for further rent amendments. Based on current data, we believe the net impact on short-term cash flows will be limited as the majority of the deferred rents will be received in the second half of 2020 or early 2021. Over 95% of full year 2020 rental income is expected to be received by year end.”

Laura Elkin, Portfolio Manager of AEW UK REIT, said: “Throughout the pandemic our rent collection levels have so far been robust, in particular from our warehousing assets, where collection for AEW UK REIT is on average around 95%. During the lockdown from March to June, we had some tenants who were generally struggling with cashflow and tried hard to accommodate them by either deferring payments or offering short-term rent-free periods in exchange for, say, a longer lease term. Since lockdowns have eased, we have been encouraged to see that the vast majority of our tenants wish to continue operating their businesses as usual and this has included the full payment of rent which has been reflected in a greater speed of collection.”

Nick Preston, Partner and Fund Manager of Tritax EuroBox, said: “Our buildings are key operating assets for tenants' businesses providing the goods and services that the underlying customers continue to require. As at 31 July 2020, 100% of agreed rent due by that date has been received. As our consistently strong rent collection figures demonstrate, the logistics sector remains resilient despite the impact of the COVID pandemic.”


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