Warehouse REIT PLC (AIM:WHR) is expected to benefit from higher industrial rents in 2023, leading to an upgraded rating from analysts at the Royal Bank of Canada (TSX:RY).
Having underperformed against RBC’s projections by 15% in the past six months, RBC predicts an upside on London-listed WHR shares and has shifted its rating from ‘underperform’ to ‘sector perform’ accordingly.
RBC has made an incremental change of 1% to its earnings forecast for 2023 and has retained a share price forecast of 115p.
Warehouse REIT faces a headwind in the form of a legacy portfolio of older buildings with shorter leases to typically smaller businesses; a volatile mix during a recession.
“Furthermore, we believe the current investment market conditions will make it more challenging for Warehouse REIT to deliver on its planned disposals, said RBC, adding: “The switch from acquisitions to disposals is also likely to slow the growth in the importance of the Cambridge-Oxford arc within the business.”
An upside scenario of 160p is given, contingent on low vacancy rates and steady rent growth rates.
At 107.23, Warehouse REIT is trading at a 5.9% forward dividend yield.