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Circle Property buoyed by demand for good commercial property

Supply continues to diminish as more offices convert to residential status
John Arnold
John Arnold: Demand in the regions is buoyant

More offices being converted into flats helped Circle Property PLC’s (LON:CRC) property values and rental income rise sharply over the past year.

The AIM-listed group specialises in acquiring commercial properties that need a bit of TLC/refurbishment and demand for space in good locations in regional cities remains buoyant said John Arnold, chief executive.

WATCH: All good news for Circle Property as demand for provincial office space remains strong

“Supply continues to diminish as more offices convert to residential. Indeed, in Bristol the office supply has shrunk by 17% over the last year,” he said.

 An independent valuation at end-March valued the portfolio at £114mln or up 22.6% year-on-year and by 54% since it listed on AIM in February 2016.

Occupancy in the developed portfolio was 99%.

Rental income rose by 21.5% to £6.83mln, half of which stemmed from refurbished properties and 21% to lease renewals.

Reversionary rents up 12.5%

On a reversionary basis, Circle estimates annual rental income currently is £9.93mln or a12.5% rise year-on-year.

The company has just bought units 710 and 720 in the Aztec business park in Bristol, a development where it already owns one unit.

Both properties are fully let with a weighted unexpired lease term of 4.85 years and generate a total passing rent of £351,573 per annum, a yield of 7.9%.

“Aztec West provides us with another high-quality asset from which we believe we can create additional value,” said Arnold.

Elsewhere, the ground floor restaurant section of Somerset House in Birmingham has been let on a 20-year lease to Cameron Brewery.

Shares rose 1% to 157.5p.

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June 28 2018
"This has been another successful year in which the group has achieved a 25% uplift in NAV, significant lettings successes across recently completed developments leading to a 21.49% increase in contracted rent and a strong performance across our key metrics," said the CEO, John Arnold.

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