Schroder Real Estate Investment Trust has secured £1.2mn of additional annual rental income through nine lettings across its enlarged UK property portfolio, giving investors an early indication of progress since the trust completed its acquisition of Picton Property Income.

The new leases were agreed since the trust’s summer trading update, with rents averaging 11 per cent above estimated rental values. A further 62,500 sq ft of vacant space is under agreed terms, which could generate another £1.1mn in annual rent if the deals complete.

An enlarged portfolio takes shape

The Picton acquisition, completed in the autumn, has produced a trust of 54 properties valued at £859mn, occupied by around 450 tenants and generating annualised rent of approximately £51mn. Against an estimated rental value of £73mn, the gap between current income and market rent is the trust’s clearest growth opportunity.

Capturing that gap depends on successful leasing, tenant demand and the cost of bringing vacant properties into use, which makes each letting above estimated value a useful data point for investors watching the integration.

Industrial and logistics space has led the demand. The shift towards online fulfilment has kept occupier interest strong for well-specified units, particularly those with modern energy credentials, and the trust’s refurbishment programme is aimed squarely at that market.

Refurbishment pays off in Norwich

The largest transaction illustrates the strategy at work. At Union Park Industrial Estate in Norwich, parcel delivery group DPD has taken 47,944 sq ft on a new lease generating £407,950 a year, equivalent to £8.51 per sq ft.

The letting followed a £1.1mn refurbishment that combined four units and lifted their energy performance certificate ratings from C and D to A. The new rent is 15 per cent above the property’s estimated rental value and 59 per cent above the rent received before the works, a demonstration of how targeted capital expenditure can support income growth while improving the portfolio’s environmental credentials.

Broad progress across the sectors

Retail properties have contributed too. The Gym Group has completed a 15-year lease without breaks at Churchill Way West in Salisbury at £155,000 a year, while Matalan has renewed at a Bletchley retail park for £529,550 a year and Tesco has taken a 15-year lease at Headingley Central in Leeds at £115,000.

In the office sector, a Northampton tenant has taken the whole of Peterbridge House on a 10-year lease at £220,000 a year, 21 per cent above the previous passing rent. Agreed terms on a further 20,000 sq ft of office space across London and the south-east could add £547,000 annually.

For a trust working to close the distance between passing rent and market rent, the quarter’s lettings suggest the approach is gaining traction across industrial, retail and office holdings alike.

The income trajectory also matters for shareholders. Rental growth of this kind supports dividend cover over time, and the pipeline of agreed terms suggests the trust expects further progress in the coming quarters.

Energy performance is a quiet theme across the lettings. The Norwich refurbishment lifted certificate ratings to A, and increasingly tenants ask for the same standard elsewhere, making environmental upgrades a leasing tool as much as a compliance exercise.