Stellar completes another successful commercial property development
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The completion of four brand new industrial units in Hoddesdon in Hertfordshire is the latest in a line of Stellar Asset Management commercial property developments.
Our approach to commercial property development epitomises the principles of our core investment philosophy: buy well, manage well, sell well.
Bought and sold at a favourable price
We seek to acquire assets on behalf of our investors with strong return potential in private off-market sales. This allows us to buy the asset at below the open market price. Following development, we then sell these assets on-market when the price we can realise represents our investors’ best interests.
Sited on an existing industrial estate, the Hoddesdon development benefits from excellent transport links with all necessary infrastructure and access in place to make it an attractive proposition for both tenants and long term buyers. This kind of site typically garners a premium. However, our longstanding property development partner, Tavis House Properties, alerted us to the opportunity, enabling us to acquire the site in a private, off-market sale.
Meeting underserved demand
To inform any acquisition, it is important to establish areas in which demand is underserved, to find a largely unmet need and then think like a consumer about how best to meet it.
Within commercial property, we see this high demand, low supply ‘sweet spot’ is industrial, distribution and warehouse space for small and mid-size enterprises (SMEs).
Britain’s 5.5 million SMEs account for three-fifths of the employment and around half of the turnover in the private sector. But all too many do not have the room to prosper and grow because of the country’s chronic shortage of accessible and flexible units for businesses of their size and variety.
The ideal size
The Hoddesdon development is made up of units of varying sizes to appeal to the broadest possible range of SMEs – from 3,700 square feet to 44,300. The smaller units are targeted at owner occupiers, while the larger ones can be rented out ahead of eventual sale to an institutional commercial real estate investor.
We are often asked why we do not focus on the ‘big shed’ warehouse developments that are springing up around the country. The short answer is that we do not want to put all our eggs into one basket. There are only a few companies that need this kind of mega-capacity, so the potential market is small and already well-supplied. This strategy does not align with our ethos of diversifying investor capital across sectors to mitigate market risk.
Easy reach
From an accessibility perspective, the location of the Hoddesdon development is ideal. The industrial estate is served by a dual carriageway leading directly to the A10, allowing drivers to access the M25 London Orbital and all of Greater London within two hours. At the same time, the site is big enough to allow ample parking for lorries and trailers.
Sustainable and efficient
To augment the appeal of Hoddesdon units, the modern design includes the green and resource-efficient specifications needed to secure an ‘excellent’ BREEAM sustainability rating. The high rating provides assurance for customers and employees that the company is following best practice, while helping to boost operational efficiency and contain energy costs.
Successful formula
With practical completion of the Hoddesdon development achieved in July 2024, the units are already attracting significant interest, with 50% of units either sold or under offer.
We have further developments of the same ilk in the pipeline, which have commenced construction in 2024 in Poole and Tunbridge Wells.
If we look at previous developments, we can see the benefits for investors of this buy off-market, develop to meet underserved market need and then sell on-market formula. For example, the sale of all units at our Haddenham business centre, completed in 2021, achieved an internal rate of return (IRR) of 14.7% for investors, well above our 5% target.
Delivering for our investors
David Stein, Investment Manager at Stellar Asset Management, works closely with our development partners on site selection, investment due diligence and development. Commenting on the successful completion of the Hoddesdon development, he said: “SMEs are crying out for quality commercial space. We see a significant investment opportunity in meeting this demand. The Hoddesdon development has wide appeal thanks to its location, modern facilities and excellent transport links. We can therefore realise an attractive return for our investors and then move on to further commercial property ventures in the pipeline.”
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Important Information
Stellar Asset Management Limited does not offer investment or tax advice or make recommendations regarding investments. Prospective investors should ensure that they read the brochure and fully understand the risk factors before making any investment decision. The value of investments and the income from them may fall as well as rise and is not guaranteed. No assurance or guarantee is given that any targeted returns will be achieved. Forecasts of potential future results are not a reliable indicator of actual future results.
Stellar Asset Management Limited of 20 Chapel Street, Liverpool, L3 9AG is authorised and regulated by the Financial Conduct Authority.