Tritax Big Box and SEGRO upgraded as Peel Hunt says new lockdown will boost industrial and logistics

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Both Tritax Big Box REIT PLC (LON:BBOX) and SEGRO PLC (LON:SGRO) have been upgraded by analysts at Peel Hunt as they reassessed their views of the real estate sector and highlighted that the new lockdown in England was likely to increase demand for industrial and logistics assets.

In a note on Thursday, the broker upgraded Tritax to ‘ add’ from ‘hold’ and increased its target price to 170p from 150p, saying the increase in occupier demand “provides a more favourable backdrop for Tritax Big Box REIT to secure pre-lets across its development pipeline, and the tightening in yields should lead to stronger valuation growth”.

The broker also welcomed the firm’s recent £130mln round of disposals.

“There had been apprehension surrounding the company’s ability to recycle capital from its investment portfolio into the Tritax Symmetry pipeline. The first stage of this process has now been executed. We believe there is now upside risk to forecasts and with the shares trading on a substantial discount to its peers, we believe the current price presents an opportunity”, Peel Hunt said.

Meanwhile, the broker upgraded SEGRO to ‘hold’ from ‘reduce’ and retained their 880p target price following what they said was “share price weakness over the past month”.

Looking to the sector as a whole, Peel Hunt said that during the second lockdown “industrial and logistics is one of the few subsectors across the real estate space where the impacts are well understood and furthermore positive”.

“Once again businesses across the UK will be forced to rely heavily on their distribution networks to facilitate online orders and the UK’s adoption of ecommerce is likely to increase. This was demonstrated in the first lockdown, as was the proven income security of industrial and logistics assets, which has led to heightened investor demand”, they added.

Shares in Tritax rose 1.9% to 165.8p in lunchtime trading, while SEGRO was up 2.2% at 959.8p.

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