Rupert Mucklow, Chairman, will comment:
The Midlands property market has continued to perform well during the first four months of this financial year. Our vacancy rate has been maintained at our record low level of 2.8%, while property yields and values appear to have stabilised. Investor demand for modern regional properties remains strong.
However, we are starting to see signs of caution from some occupiers due, we believe, to uncertainty over Brexit negotiations. Although we do not anticipate any significant change in our occupancy level, or a decline in rental income over the next 6 months, we expect the letting of our remaining vacant properties to become more challenging, with occupational decisions taking longer.
There is still a shortage of good quality industrial space in the Midlands. The majority of our properties are considered to be modern and in prime locations. Despite occupier caution, we believe that the prospects for further rental and capital growth remain positive in the medium term. For as long as it remains difficult to acquire modern industrial properties at acceptable prices, we will continue our current strategy of prudently growing our rental income and property portfolio through development.
We have recently obtained detailed planning consent and appointed a contractor for the first phase at Mucklow Park, Tyseley, Birmingham, which will comprise 8 industrial/warehouse units totalling 135,000 sq ft. Approximately 45% of the space has been pre-let, with completion of the development anticipated in October 2019.
We are currently in a transitional period, at the later stage of the property cycle, which could continue in the same positive manner for some time. However, should the property market weaken, we are well positioned to capitalise on any investment or development opportunities that may arise. Our balance sheet is in good health, with total net borrowings at 31 October 2018 of £73.7m, against a property investment portfolio valued on 30 June 2018 at £433.5m.
Last week, the Board announced some changes at Executive Director level, as part of the succession planning for our business, so as to provide continuity and stability in leadership for our Company in the future. The changes are being carried out in an orderly manner and were triggered by my decision to start relinquishing my day to day duties, having served 24 years as an Executive Director.
As a consequence, Justin Parker, Managing Director, will step down from the Board and leave the Company on 31 December 2018. The Company intends to recruit a CEO who will combine both of our executive roles and bring new skills and opportunities to the business. I will undertake the role of Managing Director from 1 January 2019 until the new CEO has settled in, after which I will assume the role of Non-Executive Chairman.