Tritax Big Box REIT plc (BBOX) Earnings Call Transcript & Summary

Good afternoon, everybody, and a very warm welcome to our first investor seminar focused on our development portfolio. And also to extend a very warm welcome to our audience in the room with us here in London. Welcome. Thank you for taking the time to join us. I'm Ian Brown, I'm the Head of Investor Relations for Tritax. As many of you will know, not only are we the largest investor in U.K. logistics, but we also own and control the largest logistics-focused land portfolio capable of delivering 40 million square feet of high-quality logistics space and giving us the potential to more than double our contracted rent roll. The purpose of this session is exploring that significant potential in more detail, demonstrating the progress that we are making and explaining why we are so excited about the future prospects of the business. Before I hand over to Colin, a quick bit of housekeeping. This is being webcast live, and we have over 250 people on line with us. And after each section of the seminar, there will be an opportunity for you to ask questions. Please type your question in the box online, and I will then pose them to the team. This is being recorded, and a replay will be available on the website afterwards. And finally, I would like to take this opportunity to -- really on behalf of all the Tritax team, to say congratulations to -- and well done to our colleague, Jo Blackshaw, a key member of our IR team, who has successfully rowed across the Atlantic in 40 days, with a crew on the mothership. A really phenomenal achievement, and we were very proud to sponsor her in doing that. So well done, Jo. And with that, I'll hand over to Colin Godfrey, our CEO.

Well, thank you, Ian, and good afternoon, everyone. For those of you that don't know me, my name is Colin Godfrey, I'm the CEO to Tritax Big Box REIT, and I've held that position since the IPO in 2013 when we launched the business. Thank you all for taking the time to attend today in the room, and of course everyone that's joining us online as well. Hopefully, we'll be able to all get together and attend these events more in person in the future. Most of you will hear from me quite regularly during the course of the year. And today provides an opportunity, however, for me to take a back seat and to hand over to a number of my colleagues who are experts in their field, senior team members, and they'll talk you through some specific areas of what we're doing on the development portfolio. So as Ian said, the aim of the next 2.5 hours, approximately, is to throw some more light on the development side of our activities and to demonstrate accelerated pace that we are demonstrating in our development portfolio, enabling us to generate acceleration of income growth. And we have a clear strategy in our portfolio to exploit that portfolio that we acquired a little under 3 years ago. And we're now seeing the benefits really flow through to our bottom line. The financial impact is accelerating. And this will continue not just in the short term but into the medium and longer term as well. So to bring this to life, we've got a really talented and experienced team here that will take you through the detail, as I've said. And to start, I'll just provide a very brief introduction to you on our unique market position. I will also draw attention to how we are able to bring that strategy to life, delivering in the development capacity to provide significant growth for our business. And this gives us real confidence as we move forward. Now I'll then hand over to Kevin Mofid. Kevin is Head of Logistics Industrial Research at Savills and he's a leading commentator on the sector. And Kevin will take you through some of the occupational and investment statistics for our market. Welcome, Kevin, a little bit later, and thank you for joining us today. Mark Ferguson, our Development Director of Occupational Leasing, will then provide context to the strong market fundamentals that we're experiencing. He'll explain our customer-focused approach and our intelligence-driven thinking and how we're capturing lettings in the market in the current day. Andrew Dickman will then focus on the breadth and depth of our development capabilities. And these are key components to our competitive advantage. And Andrew, just to explain, is Director of Tritax Symmetry. He has over 30 years' experience in commercial property, and he leads our Manchester office. After that, Phil Redding will provide more granular detail on our land portfolio. And he will walk you through the great progress that we're making and explaining the opportunity ahead. Phil is a Director of Investment Strategy at Tritax and he heads up the development activity of our business. And finally, Frankie Whitehead, our Finance Director, will then tie things back to our financial performance with strong earnings visibility that we've created to provide an update on our overall outlook before I then finish by wrapping things up. So if there's one overall message that I want to convey to you today it's this: we've never been more excited, and we really are excited about the future prospects of this business. We're incredibly well positioned to take advantage of the market opportunity that we find ourselves enjoying right now, having carefully laid the strong foundations for success. And our development program is really now performing. This is already showing through in an accelerated performance and it underpins our growing confidence in returns. So I'll start with a quick reminder of our leading position in the U.K., which Ian just touched on. We are, as Ian said, the largest investor in industrial logistics warehousing in the U.K. We own and actively manage and develop prime logistics assets for top-class covenants, and really high-quality buildings. And we own the U.K.'s largest industrial logistics-focused land platform. And we're significantly ahead of our nearest competitor in that regard. So combined with a very strong market driver backdrop, this means that we can deliver sustainable income value growth for shareholders, not just now, but over the medium and longer terms. And as you can see on the top right here of the graph, we deliberately built our portfolio to provide a blend of open market and inflation-linked growth. And our land portfolio means that we've got significant development growth potential ahead of us. And this is the focus of today's seminar. And as a context for today's session, it's important to remember that we've designed our strategy to align with the long-term drivers in our market. Now most of you are familiar with this chart, but I'll just highlight a few components, please, if I may. At the top of the triangle, you can see that we have a portfolio of really great assets, attracting world-class quality customers. We've also built the capabilities to add value to that portfolio through direct and active asset management. And we apply our skills, our insights and innovation, gained from being the U.K.'s largest investor in logistics, to develop our land portfolio and at a really attractive yield on cost of 6% to 8%. And it's this last element that we're focused on today. But I really want to emphasize the point at the bottom of this chart, which Frankie will touch on a little later. And that is this, that this strategy is underpinned by a really disciplined approach to capital allocation, with sustainability being embedded across the whole of our portfolio and all of our activities. The key point here is that the strong position that we're now in, and the benefits we're already seeing, are the result of a very deliberate strategy, which we're continuing to execute. The strategic focus on development started back in 2014. And since that time, we've completed 17 forward funded pre-let developments with third-party developers. Now 2017 saw our first development land purchase. And that was the land at Littlebrook Power Station in London inside the M25, next to the river Thames, a phenomenal site. We've successfully developed and let 2 really important buildings on that site. And some of you will have been to the site and seen it really come to life. The first of them is Europe's largest logistics building, 2.4 million square feet, a big solar array, it doesn't have a gas connection. It's a phenomenal piece of logistics real estate. And we've let that to Amazon for 20 years. The next building was let to IKEA, and that's 450,000 square feet. So that site is already delivering profits significantly exceeding our original expectations for the whole of the site. And there's still much more to come at that development. Advancing to February 2019, we acquired db Symmetry. And this was a landmark transaction for our business, because not only did we acquire a superb land portfolio that benefits from over 10 years of work in advancing planning, et cetera, but we also welcomed a market-leading team with really high quality and very talented and experienced development and planning professionals. And one of them, Andrew Dickman, is sitting here with us today. So you can see that our approach to development has been carefully considered and deliberately balanced to complement our investment portfolio activities. Now this slide most of you will have seen before, but it highlights the results of our successful deliverance of -- on our investment strategy over the last few years. As shown on the left-hand side, we've got a really good portfolio mix between quality in our foundation assets and that providing the [ backrock ] really to all that we do in terms of the value add, but also in terms of our development activities. And that's shown on the right-hand side. And Frankie will cover that a little bit later, more particularly the rental growth and the income generation that we're able to deliver from that. So -- and that is the key focus of today, is the ability to capture that significant rental growth as we move forward and develop out our land bank. So we have a portfolio that is capable of delivering over the next decade. And I believe that the occupational market conditions will remain very, very favorable for a number of years to come. And that is partly due to the structural tailwinds which are driving our market, but also due to the constraints on the supply side, which you'll hear about more a bit later. And we are very well positioned to take advantage of that market strength with our experienced team, deep market knowledge and of course, the cost efficient control of a maturing land portfolio plus the financial firepower to unlock its potential. The really good news, however, is that our land portfolio has now come of age. It's delivering very attractive returns right now, and as you will see on the right-hand side of this chart, with some really major wins in 2021. But we've already made a really positive start to 2022, and that's very exciting. So we're looking to capture that accelerated rental growth, as I mentioned, and, of course, to deliver a range of building sizes constructed to the highest ESG standards to support our customers' requirements. So all in all, it's a really exciting time for us as a team. We are highly energized and there's a lot going on within our business. On that, I'm going to hand over to Kevin now, and Kevin is going to provide some insights into what's happening in our market.

Hello, everyone. I'm Kevin Mofid, Head of European and U.K. Logistics research for Savills. And thank you to Colin, Ian and the team for inviting me to speak to you today. I'm really sorry I can't be with you in person. Hopefully, I'll be invited back for the next seminar, and we can do it in person then. Hopefully, I'm known to many of you in the room and on the call. I've got 10 minutes really to set the scene on the U.K. logistics market and some of the key drivers in our world at the moment. Now I've only got 10 minutes, so I'm going to get straight into the stats, which should be coming up on the right-hand side. There we go. The technology works. Brilliant. So I'm running out of superlatives to say about the market really. I've been talking and writing about warehouses for about 15 years now and never have I known a situation where macroeconomic factors are all aligning at once, and they are amplifying our market, whether it's take-up, supply, vacancy, any other metric that you want to examine. The chart that I've got up here just shows our take-up stats. These go back to 2007. Pre-COVID, take-up was averaging 32 million square feet a year. The last 2 years, it's been above 50 million square feet a year. By our measure, 55.1 million square feet in 2021, 86% above the long-term average. Another point to note, 220 separate transactions. The first time we've ever been over 200 deals above 100,000 square feet in the occupational market. A lot of them across the size ranges. It is a sheer volume of deals that is driving the market up in this way. And the next slide just looks at this by regions. I won't labor this point too much, but really what we're showing here is that every single region has been above the long-term average, many regions with record years as well. So the point, again, is that it's not just focused on one area of the country, it's happening across the board. The next slide I want to show is about the type of take-up the market is experiencing, whether it's spec take-up, build-to-suit, secondhand. I'm going to focus just on the yellow part of this chart, and that is the take-up by area as a proportion. The blue line is build-to-suit. The purple line is speculatively constructed space, and the red line is secondhand space. Historically, over the last decade, build-to-suit has been averaging around 50% of take-up. It's fallen back to 36% of take-up in 2021. And occupiers, driven by the need to get hold of space quickly to service their requirements, have been taking more speculative space. I'm going to come onto supply in a few slides' time, but I actually think there's a strong case that in 2022, that line will start to inverse again, and we'll start to see a rise in the level of build-to-suit take-up, because actually, the supply just isn't there. And as I said, I'll come onto supply in a minute. All of this occupier demand is also having a big impact on lease lengths. We launched some research yesterday with Tritax Symmetry. It was our logistics census. And one of the questions we asked our occupier survey was their attitudes to lease length. And actually, it was far down their list of things that they were concerned about. They were much more concerned about some other factors such as employment, power, the shift to electric vehicles. And this is borne out in this chart, 2 key points here, the red line and the green line. The red line is leases under 5 years, the green line is leases between 5 and 10. Point here is that occupiers are thinking more strategically. They're committing to space for a longer period of time. And that's why we're seeing this kind of upward trend in the average lease length as well. I just want to focus quickly on who's taking space. One of the questions that I get asked a lot is, well, the market is dominated by online retailers and so on. It simply isn't the case to say that. Yes, Amazon are a key driver of the market. But I've tried to scratch the surface of this. And a couple of things I just want to highlight in this chart. The most important one is the green at the top. That is the level of take-up by 3PLs, companies like Eddie Stobart, Wincanton, DHL. They took the highest amount of space they've ever taken last year, proportionally and in absolute terms, just over 13 million square feet. You have other new entrants to the market, Chinese e-commerce companies. So in my mind, it's a very balanced market with a lot of depth and occupier demand. And the next chart is deliberately hard to understand because what I've done here is I've just looked at the amount of companies who have taken leases over the last 2 years. And as you can see here, there is a very, very long tail of active companies. 257 companies have taken space over the last 2 years, 37 of those companies have taken more than 1 unit. And the next chart just tidies that up a bit, makes it look a bit cleaner. And you can see here the -- how huge that Other category is. You can also see how important Amazon are nonetheless, but -- you can see some new entrants there, Supersmart, MH Star, you can see some household names and you can see some companies that are growing rapidly, like Kammac, a Northwest-based 3PL, growing, taking space, it actually made the top 10. So I think my point here is that there is a very strong and diverse mix of occupiers in the market at the moment. And I mentioned our survey with Tritax Symmetry, which we launched yesterday, our logistics census. Occupiers are in expansion mode. 90% of the respondents to our survey -- which is in its fifth year, by the way -- have said that they are in expansion mode, they expect to take more space. And this is borne out on the data in our next chart, which is a database of requirements which we keep within Savills. We have a software system that logs every single requirement in the market. Since January 2020, 870 million square feet of requirements have been logged, which is an astonishing number. Another astonishing number is that over 50%, 51% of those, have been for units over 400,000 square feet. So in my mind, there is clearly enough demand in the market to get us to above 50,000 square -- 50 million square feet of take-up again. The biggest issue, though, is supply. Supply is down for us, our measure. We include a wide range of properties in our supply statistics; other providers have a slightly different definition. But based upon our data, we're at 2.9%, it's the lowest vacancy we have ever recorded. And supply has fallen by 13.7 million square feet in 2021. So if we look at the speculative pipeline on the next slide, we're tracking 18.6 million square feet under construction. Around half of that is already under offer. So it's not even going to hit our supply statistics. It's not going to make that dent. The other half, well, I'm sure it will be discussed today, issues around the construction supply chain. Actually, will that be delivered in 2022? Will it be delayed into 2023? My point is we are in a sustained period where vacancy is expected to be low because of what's going on in the wider market. And occupiers know this. If we look at the next slide, this is just showing how quickly speculatively constructed buildings are leasing. Historically, a speculatively constructed building would have had a void period of around 12 months. Look what's happened in 2021. Our void period is minus 2 months. Well, how can that happen? It's because the buildings are leasing during the construction phase. Not unprecedented, but certainly unprecedented on this scale across the market and across the size bands. So that just shows the level of demand in the market that we're seeing. I've already mentioned the stories here on the next slide about construction materials. I'm not going to dwell on this, because actually what I want to -- do talk about is what impact this is having on rental growth, on the next slide. I just want to say -- talk this through quickly. What it's showing is -- the yellow bar is what the rental growth forecasts that we at Savills use from a company called [ Realfor ]. What those forecasts were saying in December 2020, that's the yellow bar. What actually happened in 2021 is what's shown in the red: huge outperformance of the rental growth forecasts. If we look at the green, which is what the rental growth forecasts are saying now, and then look at the blue, the blue is my projection of where things are heading because what I've done is taken the last 2 quarters of rental growth and then effectively extrapolated that forward. And the reason I've done that is because I can see no discernible change in the prevailing occupier market conditions. Vacancy is still low and expected to remain low. Requirements are still high, much higher than they have been based upon historical averages. Demand is still high. So effectively, what I'm trying to say here is that there is every reason to believe the forecasts will be exceeded again. This is all having an impact on the capital market side of things, which is on this slide. GBP 16 billion invested in the industrial and logistics sector in 2021. If we look at just Big Box logistics, that comes down to around GBP 8 billion and portfolio is around GBP 4 billion. The point here is that, again, whichever way we slice the capital markets, records have been tumbling. What that is all doing is having continued downward pressure on yields and cap rates. We're at 3.25% with further downward pressure expected. So to wrap up, on my last slide. Record levels of take-up, requirements remain high. There is easily enough requirements in the market to get us to that 50 million square feet of take-up again. However, the grade A pipeline is constrained, as is the speculative pipeline, contrary to what the headline numbers would suggest. We think that 2022 will see a rise in build-to-suit deals as occupiers look to that part of the market to satisfy their requirements. And the continued weight of capital targeting the sector will continue to keep downward pressure on yields. So that's me. Thank you very much for your time. I don't think I'm taking questions at this point. So I'm handing over to Mark, but you have my contact details if you want to talk anything through. Thanks again to the Tritax team.

Good afternoon, and thank you to Kevin for that fascinating insight into the wider market. I think you'll agree, I've got a tough act to follow after that. But firstly, let me introduce myself. My name is Mark Ferguson. I'm Director of Occupational Leasing at Tritax and joined the business a year ago. Prior to that, I spent 25 years working for the global 3PLs, including DHL and CEVA, and held a number of senior operational and commercial roles. So previously, I've been responsible for running large-scale, automated temperature-controlled warehouses as well as selling outsourced solutions to companies across Europe. So I've been brought into the business to really give an occupier's insight in terms of the types of warehouses they're looking to operate and the role they play within their supply chains. I split my time working with our existing occupiers and spend time in London with the asset management teams across all of our funds, getting a better understanding of their supply chains, as well as spending time in the Symmetry offices in Northampton and Manchester with development teams, engaging with new occupiers as well. So if I take you on to the next slide, as Kevin has outlined, 2021 was another record-breaking year, and we don't see any letup in that demand in 2022 and beyond. So what I want to do is show you how we are maximizing the opportunity that presents for Tritax. And firstly, I'll start with our occupational strategy that we've developed. And there's 3 key objectives that we're looking to achieve from this strategy. Firstly is to make sure we do have that fantastic deep insight into our existing occupier base. Also, secondly, want to be very clear in terms of the new sectors we want to target, and the occupiers in those sectors we want to partner with. And thirdly, when we're presenting a proposal or a solution to a customer, we want to make sure it's tailored, bespoke and meets their individual requirements. And there's a number of levers that we use to achieve that. So if I concentrate on the left-hand side of the slide, this is very much in terms of how we engage and undertake that targeting activity. So with our existing occupier base, we have mapped in detail 10 of our existing occupiers' supply chains, and we're in the process of doing that for a further 5 as we speak. And our intention is to roll that exercise out across our whole occupier base. Now that is giving us that understanding is also giving us -- identifying opportunities where they may have gaps in their supply chain that we could fill with new assets or growth constraints that are on the horizon. In terms of targeting, we've got an in-house market research team. So I spend time working with them in terms of understanding our key target markets. So I know the top online retailers in the U.K., the top 3PLs, cold chain operators, the covenant strength for those businesses and also, more importantly, the decision-makers in those businesses as well. We are members of a number of different industry bodies, and I regularly go to industry events where I promote the Symmetry platform, meet those decision makers and get close to them and set up follow-up meetings. On the right-hand side of the slide -- explains how we then use that understanding of our target market when we're proposing solutions back to them. So for each of our symmetry development schemes, we are very clear on what the competitive landscape is around those in terms of competing schemes and how we can differentiate ourselves from them. When we respond back to an occupier it's very much a tailored bespoke solution. So when we're proposing a warehouse, we're outlining the ESG benefits of that solution, how that will help deliver their corporate sustainability goals, how can they attract and retain labor in the local area against the competing market. And as a long-term asset manager and a partner, how we can support them in a longer-term partnership and that may involve investment in PV onto the roofs and an extension in the future, or the implementation of a mezzanine floor. And we've also developed a very effective Occupier Hub. This is our in-house customer relationship management tool that we use to track all of our enquiries, so anybody within the team has got clear visibility of every opportunity we're working on and what stage of the process that is in. So my final 2 slides, I'd just like to share some of the data from that occupier hub. And I think what's particularly exciting for me is not just the size of our current pipeline, and I'll show you that on the next slide, but the composition of it. I think we've created a really robust and stable platform to provide growth, not just in 2022 but beyond as well. So I'll start with the size of the enquiries that we're getting and split it into 2 brackets, the enquiries over 300,000 square foot and below that. Over 2/3 of the enquiries we get are for the bigger boxes of over 300,000 square feet. And what's typically driving that when I engage with occupiers is the need for them to hold more inventory in their supply chains, particularly to counter the effects of Brexit, COVID, supply chain disruption. But a number of the occupiers are also consolidating smaller warehouses into one bigger, often automated, more efficient, warehouse. So that's 2/3 of our pipeline. And then in terms of the remaining bucket, we have got the ability to deliver bigger and smaller warehouses on each of our schemes. So if we're looking at a parcel hub that typically sits below that 300,000 square foot, we are engaged with a number of those operators on each of our schemes as well. In terms of the right-hand side of that graph, I'm in a very fortunate position. We've got a fantastic platform of over 40 million square foot across the U.K. and that has shown how the enquiries match against that scheme. So we've got 2 fantastic schemes in Kettering and Rugby, and they are accounting very similar to the national picture that Kevin presented, 1/3 of our pipeline. That's [ typically ] those organizations that are looking to be close to the golden triangle to implement a national distribution center solution. But you can see from the graph, we've got schemes along the M40 and down the M1 and up in the Northwestern Wigan and Merseyside that are proving equally as attractive with occupiers in those areas. If I move to the bottom half of the graph, in terms of the left-hand side, the split between enquiries of existing and new occupiers. And what's really encouraging here is 55% of our enquiries are with existing occupiers. So the time we're taking to proactively engage, understand their business is translating in terms of the opportunities that we are receiving. But obviously we do want to bring new occupiers into the fund as well. So we've got a good split between the 2. I was hoping to be able to announce a win here today with an existing occupier that has come off the back of that proactive engagement. It's under offer, hoping to get a signature on the paper tomorrow. But this is where we have user supply chain map, engage with the logistics team within that organization, and identified a gap in the network up in the Northeast. We've put forward through the Symmetry platform a warehouse solution of 430,000 square foot, and that's going to be going live in December this year. So done off-market, it wasn't a competitive situation, and we're looking to do more of that. And then finally, our enquiry schedule looks very similar to the picture that Kevin painted in terms of the types of occupiers that we're working with. Obviously, the boom in online that we've all experienced the last 2 years, the rise of the third parties as well. We are engaged with all the key players in those sectors. So finally, I want to share just the size and quantum of the enquiry schedule at the moment, and we've got over 26 million square feet of opportunities. Now this is taken as a snapshot in time. We're getting new enquiries every day. But our inquiry schedule has never been as buoyant or as strong as it is at the moment. So it's incredibly exciting for us as a business. These are real opportunities. We know there's a known requirement, and we as a business know that we can potentially satisfy that requirement as well. So out of the 26 million, 2/3 of that schedule, we're already engaged in high-level discussions. We've given high-level terms. We've typically given plans as well at that stage of the process. And we've got over 10 million square feet already at an advanced stage of negotiation. And typically, at this stage, we're in the shortlisted stage potentially against 1 or 2 other schemes. But in a number of these instances, we're now under offer or into listers' hands. So we'll come on to it in terms of reforecasting our guidance on the number of pre-lets we'll deliver this year, and it's going to be above the previous guide of 2 million to 3 million square feet. And this is the reason, because we've got 10 million square foot there that we're confident of being able to convert a higher number than the 2 million to 3 million. So hopefully, you've seen the national picture from Kevin, how that's translating down at a local level for us as Tritax. I think we are more than capturing our fair share of that market demand at the moment and really have a clear plan in place to make sure we don't just do that for 2022, but we've created a platform to ensure we take strong advantage of that market 2023 and beyond. So thank you for your time.

Great. Thanks very much, Mark. So just a reminder, we're going to pause for some questions. If you're on the webcast, you can type your question into the box there, and I'll then read it out. If you're in the room, we'll do it the old-fashioned way with the arm up in the air, and we'll begin with the webcast. We had some questions coming in, Mark, whilst you were speaking there. The first question. Building on what Kevin was saying, can you give us sort of a view on how much demand does Amazon represent within our current pipeline?

Mark, if I could just start, to put this into context, Amazon represents a little over 17% of our current rent roll on the investment portfolio. We have given guidance to the market before that there's headroom. We will be more than happy with the 20% level and potentially up to 25%. Clearly, Amazon is a world leader in terms of the quality of their covenant and the space they're in, much of the market is looking to Amazon and the way they're doing business to replicate some of their expertise. But perhaps, Mark, you'll be able to give a bit more color on the ground as to what we're seeing on the development portfolio.

Yes. Thanks, Colin. I mean, Amazon is obviously a valued existing customer of ours and one we're keen to continue to grow with. So we're very aligned with all their stakeholders across their business. We understand the building specification they're looking for and their different operating models. I think it's fair to say our schemes are attractive to Amazon based on the location of the schemes, but also the fact we can accommodate different size units for them. So if I look at our current inquiry schedule, out of the 24 schemes that we've got through the Symmetry platform, we've got active discussions ongoing on 7 of those with Amazon. And so -- across the U.K. I think important to note, as per Kevin's message, we've got a good breadth of other occupiers beyond Amazon as well. So we're not sat here relying on Amazon. If I look at the total number of enquiries on our schedule, they represent less than 10% of the total number of enquiries, so definite opportunity to grow. But working with a number of other occupiers as well.

The next question has come in. It's just about the synergies between the investment and development portfolio. Can you give any further evidence or details on that for us?

Yes. So I was brought in to play that role between the asset management and development teams. And I spend every day engaging with existing and new occupiers. So the -- I sort of mentioned the deal that we're hopefully signing tomorrow. Last week, I was with the head of network design for another big online retail customer of ours who was sharing their 10-year property strategy and how they're looking to open 2 to 3 sites each year for the next 10 years. So I'm engaging more with the supply chain directors, the logistics directors who are typically handing the requirements to a real estate team. And that discussion last week, we identified 2 opportunities for the Symmetry platform that are going to be an opportunity for us in the near term. So they are just a couple of examples, but I'm having those types of conversations every day.

Could I just add as well, 2 of the Symmetry directors are specifically targeted around being best-in-class at dealing with the occupiers, working with Mark around both the occupiers in portfolio, but also new occupiers as they come along. So we're blending the skill sets and knowledge of the development team with Mark's occupier-based team so that we've got the best, quickest rightest answer to get at the occupiers when we can.

Great. A couple more questions coming through on the webcast, and then we'll go through the room. And Miranda Cockburn at Panmure is asking, are you seeing any pushback yet from tenants regarding rent levels?

Not so. Actually, every occupier I've engaged with over the last year, probably the 3 biggest challenges for them have been around availability of labor and wanting some assurance around that. In the locality, provision of power, and that's not just within the warehouse itself. And yes, automation has increased the level of power requirement, but typically looking at the yard now and the advent of commercial vehicles and electric vehicles, making sure they're future-proofed to provide that. And then thirdly, ESG has definitely sort of increased the agenda as well. So making sure access to renewable energy, provision of electric vehicle charging points, PV on the roof from us. We have that advantage as a new building, our basic spec, we put 20% PV, solar onto the roof, 20% vehicle charging units in the car park with the capability to do 100%. So -- and having been an occupier myself, in all honesty, in terms of the percentage of the cost base that rent makes up compared to your labor cost or some of your other cost drivers, it's not a big cost driver. So I'd be much more interested in making sure I could get a warehouse where I can get people at a sensible wage rate to go and work in that warehouse and would pay an extra [ 25p, 50p, 75p ] a square foot to have access to them.

I mean we've done some research, and it suggests that, I mean, for some retailers that it's less than 1%, sort of around 0.75%. The total property costs. So if your cost goes up 10%, your real estate is a relatively small total cost increase for you as a business. And I think that the supply and demand characteristics that Kevin touched on there as well are the primary driver to why currently occupiers are not in a position to really negotiate particularly hard in relation to the rental tone or the package more generally because if they do that, and there's competition, they'll miss out on the opportunity. And it's much more important they put the right building in the right location to serve their supply chain network requirements.

Brilliant. Look, I think in the interest of time, we're going to -- unless there's any questions from the floor here in the room, we'll move on, we've got a lot to get through this afternoon. Some of the questions that are coming in, I think we will answer as we progress through. So Mark, thanks very much.

Good afternoon, everybody. Thank you for those of you who've been able to get to the room and [ effort ] to those tuned in digitally. Also thanks to Mark and to Kevin for a really good entree into the market that we've currently got and to the occupiers and how they're thinking. My name is Andrew Dickman, I'm a [ chartered surveyor ] and I'm a Director of the development platform that's embedded in TBBR. Today I have the pleasure actually to let you know a little bit more about the development platform that we have, how it works, what it does. As an overview, I'd like to give you a little bit of noise about the team, talk about the marketplace and the barriers to entry that that marketplace has. Talk about the portfolio that we have, that we've created over in excess of 10 years of finding these bits of land and sifting them and checking them and making sure that we really do like them before we engage with them, and then how we control that land and take it through the planning and development process. The Symmetry part of the business is 42 highly experienced people operating from 2 offices. Those offices are in Northampton. That's not an accident, it's the center of the golden triangle, the heartland of distribution in the U.K. And Manchester, which is the birthplace of industry in this country and the biggest driving city in the north of the U.K. Amongst the teams, there's decades of experience within the current trading name that we have and its previous iterations. That's just a little more than 20 years. The people in the business fall broadly into 4 different skill sets. We have property developers, town planners, construction and finance professionals. They all sit next to each other. They work together. And their aim is to create the best, most positive impact and produce the best developments that we can do around the portfolio as a whole. To underscore those skill sets, there's a very strong track record behind the team. It's developed over [ 40 million ] square feet of pure logistics buildings. It has and boasts and is very proud of 100% success in the way that it prosecutes its planning applications. It has the ability with the platforms that it has to deliver another 40 million square feet of space, and it continues to look at new land opportunities to make sure that we fill the barrel to make sure that our 40 million square feet is a rolling process. The business has done business with world-leading occupiers. The logos on the right-hand side of the screen that I'm looking at, left for you, only occupy a flavor of the occupiers we've worked with. So Amazon, Cadbury's, Apple, Ocado, and there's a host of other household names that you'd all recognize if we filled the screen up with more logos. It would be remiss of me at this point not to reference ESG. I'm not going to go into great detail on it because this presentation isn't about ESG. But it's important for a developer that's funding -- that's producing product that goes into its own fund, to have an eye not just to immediate profit but to the future of that fund and its ability to continue to have buildings that are institutional grade. We were very early to embrace ESG. We were one of the very first developers to contemplate net zero carbon in construction, and we've made the commitment to be net carbon zero in construction in 2021 and going forward. We continue to build our buildings to a minimum of BREEAM "very good." We are a gold leaf member of the U.K. Green Building Council and GRESB see us as global sector leaders for development. So we have a really strong commitment to sustainable development and also a strong commitment to reducing our carbon footprint year-on-year. One of the other things that we do, which is unusual, is we bespoke energy centers on all of our large schemes. That allows us to look at how we blend photovoltaic energy, battery storage, gas turbines, wind turbines, hydrogen, all together with the grid so that we can make a resilient, renewable and reliable platform for all of our occupiers. It's a real USP and one that we're continuing to develop as industry and technology develops. In parallel with that, through our construction phase, we make sure that all of our contractors are 0 waste to landfill and use as many green initiatives as they possibly can around developing buildings. The next slide pictorially shows the spread of our schemes. So as far north as Glasgow, as far south as Dartford. All the green spots are schemes that the business controls. All of those green spots are pieces of land that can be delivered for logistics development. They are all at different phases in the planning piece. So some of them have a planning consent now, frames are going up. Some of them are land which hasn't been allocated yet. All of them are focused on key population areas. All of them are on key distribution nodes. And all of them give the ability for us to respond to occupier requirements in a multitude of different sizes and different configurations. It's a really diversified portfolio, gives us huge flexibility, significant agility as we respond to the enquiries that come along to us. It's probably one of the most diversified land portfolios in the U.K. I'm going to now just try to take you on a canter through the 3 principal phases of our process once we've identified a site. The first is site identification, negotiations with land owners and then control of the land. The second is the planning phase. That's the first key value milestone for us. The third is the delivery phase, the piece where we market the schemes, find occupiers for the buildings, build them, get them let and produce the rental income stream that the fund is so keen to achieve. That's the second and equally important key value milestone. For those of you who drive up and down the U.K., there seems to be a lot of green land out there, a lot of land that could be developed. The reality is there's a very limited universe of appropriate sites for logistics development in the U.K. There's a multitude of reasons for that, but we break them down in short order into 4 different pieces. Firstly, there's a town planning environment. Before we'll get engaged with a site, we go out and we map local authorities. We ascertain political support. We look for official support. And we consider the implications of what we are contemplating in a locality. If we find a location that we want to operate in, we then work really closely with key political figures, influential people within that sector and within that geography. And we also look very carefully at the socioeconomic impact of what we're going to do and what we'd like to achieve. We'll look at the benefits and the costs of that and make sure that the socioeconomic piece and the planning pieces stack up together. If we're content that we have a solution that works, we then go to the next phase. That's actually finding a piece of land. Once we've identified where we want to be, casting back to our earlier comments about population centers and key infrastructure nodes, we then take that piece of land through a really careful sifting process. We look at its accessibility. We look at its infrastructure requirements. We do a financial and time table appraisal of how it could be developed. We look at the strength of the local market, but also how it fits into a national and international context and into supply chains that are increasingly stretched around the world. We look at the size, the shape, the topography, the ground conditions of the site, its constraints. We look at its current and previous uses and we look at its planning designation and its potential. If all of those stars align, we think we've got a site that we want to be expressing interest in, we then look at the 2 next pieces. How does it fit into the infrastructure of its location? Does it have power? And how can that be resolved? Those economic viability assessments are really quite fundamental to the land's value, its pricing, and our ability to develop it. We also look very carefully at demographics. For a site to fit into the logistics sector, it needs to be one that you can get employees to, but those employees are also customers. Looking at how that all fits together is really quite fundamental to the site's value and utility. So we look at labor pools, skill sets available now, how they can be developed, what future demographics looks like and how the site itself and the supply chain fit together. A function of this is that we have to have a really considerable and considered view as to our credibility in wanting to take a site on. Strong reputation in our market is a significant barrier to new entrants. People who work within the sector talk to people within the sector, know people within the sector. And our reputation of being able to deliver what we say we'll do, with all of the key authorities that we deal with and landowners that we talk to, is really important. From an acquisition standpoint, there's really 3 principal sectors. These aren't exclusive, but they are interesting in the sense of the weight of the conversations we have. We have landed estates that really have held on for, in some cases, centuries. They have a very long-term view. They're generally well-advised. They have a very significant and important concern about their legacy and reputations. And they have a requirement for capital generally, but sometimes prefer revenue. [ So on those ] estates, they all talk to each other, they know who they are, and we know who they are and they know who we are. A very different sector is the local authority sector. They tend to be focused on economic growth. They require comfort that the development will happen within a time frame. Their worst scenario outcome is they give a funding consent and it doesn't get developed. They're focused on job growth and retention, and they want to see growth in rates revenue to fund the tax bills of their locations. They don't generally hold commercial development skills on their balance sheet. So they're wanting a partner who can deliver those skills. And the last group of people that we talk to repeatedly are agricultural landowners. And for them a sale, it's a one-off sale, it's a massive thing for their family and their legacy. And it's not just maximizing receipt, it's doing it in the right way and doing it as quickly as they can. And it's hugely relationship-driven. The bond of trust we end up creating between ourselves and farmers as we go through the planning phase is quite considerable. You only break that trust once. So our reputation is something that we hold really, really carefully and it's something that is a USP for the business generally. We tend to acquire land in an option, which is not something that is that familiar to a lot of people. It allows us to have quite some considerable economic benefit, in the sense that options really reduce our risk whilst they give us considerable flexibility. 90% of our land portfolio is held under long-term option. Phil will talk a little bit more about this later. The 10% that isn't, we're generally undertaking some development on. There are some small portions that we also [ have as ] legacies of the developments. The benefits to us of options are they minimize risk and they maximize our potential value. They give us really limited upfront costs, which gives us a huge advantage on capital drag. They maximize our flexibility as they allow us to stay agile and nimble through the planning process as it unfolds. And they bind us really tightly to the landowners in a way that maximizes the landowners' outcome and our planning input. So they're really capital efficient. Option costs are generally less than 5% of the value of the land. They're long term: 8 to 10 years is normal. We draw down [ postal ] receipts of a planning consent, but not always the foresight. We can do it in sections often, which is, again, very efficient. And we're able to reduce the price we pay by taking the costs of planning, infrastructure and professional fees off the price that we pay. So whilst we're doing that, to the landowner's benefit, they're free to use their land. They can continue to farm it. They continue to do their other activities. And it allows them to have a managed process of leaving it. And we also generally code in a minimum land value, which gives them a baseline of receipt, which is comforting and something we always try to achieve a higher number for them than the minimum. So turning to the second part of the process, the planning process. We have 100% planning success outcome track record. And that's because we approach the planning process in a hugely professional way. We negotiate it with local authorities, with their offices with all of the key respondents to a consultation process, so that by the time it gets to an application committee, it's largely in a form that it's difficult not to approve. That takes time, often 18 to 20 months, sometimes longer, occasionally shorter. But when we get a Resolution to Grant and a Section 106 agreement which is signed, there's a huge value uplift to the portfolio. We then generally move to the infrastructure application, which allows us to go onto the site, put roads in, level it, get it to a place whereby we can take an occupier to it, and they can see it's a developable site from that moment forward. That's a 12 to 18 month process. And the option drawdown that comes before the work, but post the application, takes us 3 to 6 months. As a rule of thumb, it costs us about GBP 1 a square foot to get a planning app consent. It generally takes us more than 12 months, as the line above suggests. And I'll reiterate, because we're quite pleased about it, we do have 100% planning success rate. And we're growing our application process year-on-year. So 2019, 2.3 million square feet of consents; 2020, 3.5 million; 2021, 4.5 million square feet. It's through this thoughtful negotiated professional approach to planning that we've managed to achieve the outcomes that we have, and we'll continue to do so over the coming years. And then the fun bit: we get beyond the planning, and we've got something to do called building buildings. Before we do that, we go to market, we want to try and find some occupiers, so that when we build those buildings, we're building them for a purpose, for a person or organization. That's the pre-let route. It's the largest scale units typically, interesting that the inquiries are all tipping towards 400,000 square foot and more, which doubles up on Kevin's earlier slide, which is more pre-let development and less spec. It's longer term: these organizations don't necessarily know what they want, except for headlines, and those headlines turn into detail. It takes us a lot of time working with them. It gives us the ability to try to get to net zero carbon in use as well, which is something that we aim to on all of our projects. And it gives us the ability to work with our existing tenants within the portfolio and see whether we can become their developer of choice for the next iterations of their development cycle. We marry that with our speculative development program. That's typically our smaller units. We use it often to open up a site, marry it to the infrastructure phase, build a building at the same time. When we say speculative, we're highly informed on occupier requirements and specifications always. We talk about it all the time in our offices. We make sure that if we do, do any speculative development, it is of the moment, it is of the specification occupiers are then requiring, and it gives us the best chance to get a building let. And we obviously have occupiers we're talking to before we start spec. It's rare for us now to find that we are letting a building post-[ practical ] completion. A really good example of that is the Aston Clinton schemes, again Phil will mention later, 3 buildings there, 60% of the way through the development program, 2 of the buildings are let, that's about 70% of the scheme worth of square footage. So it's a careful balance between spec and pre-let. Over the life of the current portfolio, we expect to be more pre-let weighted than speculative. At the moment, with the strength in the market that we're seeing and with the desire to capture rental growth early, we are pushing forward more speculative development than we considered 12 months ago. But it's carefully managed. It's closely guarded in terms of specification, and it's under constant review to make sure that what we're doing is appropriate to the risk that the market presents and the opportunities it also presents. Again, at this point, it would be remiss of me not to mention the construction process. It takes us about 12 months to build a 300,000 square foot building. And actually, whether it's 150,000 square feet or 600, the time frame doesn't change that much. Before we start a construction site, we've entered into a fixed price contract with one of our construction teams. That gives us enormous cost, but importantly, program certainty. We're also backed up by the whole professional team having its warranties in place, which again, gives us huge reliance on the professionals and other teams we work with. So it's fixed price where the overruns are borne by the contractor. In an infrastructure program, i.e., one without a building, those costs come off the land price that we're paying because the costs are to get the sites shovel-ready. So they're costs that we're forward advancing against the reduced land price. We've all seen inflationary pressure. Kevin mentioned it earlier in the sector. We have tried very hard to manage that. We very early in the game brought all our contractors in, talked to them about what inflation was looking like, talked to them about volatility of materials, talked to them about program risk and came to a place whereby we very early started to preorder materials, started to be more flexible around our procurement to make sure that we minimize the inflationary costs that we're seeing. That's an ongoing process. We work with our supply chain, both the principal contractor and further down in [ main ] trading manufacturer is a good example, to ensure that we have full visibility of what their market is doing, how it's working and therefore, how we manage out the shocks and risks that inflationary push can be. Frankie will talk a little bit more about how that balances out. He can see rent and yield compression that we're seeing in the marketplace. So as an example, we put it into practice at Biggleswade, we went to Biggleswade and we took an option over 50 acres of land. It was a farm. We then achieved a funding consent in 2018 to put 5 units on the farm, 1 million square feet in total. We then ripped up that planning consent and threw it away because we got an occupier called the Co-op who came along and wanted to be at the location. We wrote an AFL with the Co-op, which exchanged in October 2018. That AFL sort of delivering 600,000 square feet of ambient, frozen and coldstore for the co-op and a 50,000 square foot vehicle maintenance unit. And that little blob at the bottom of the screen is 50,000 square feet of vehicle maintenance unit, just to give you some context. February '21, that building was completed and the Co-op are now in it. It's the first energy center that we delivered. It's producing PV from the Co-op and blending it with grid. That's 3.5 MVA of green energy. It's a transaction that's a really good example of how our portfolio of land can be developed to feed into the fund. And it was an interesting deal for us all, because it started just around the same sort of time that ourselves and the Big Box REIT came together. What it also let us do was take an option over 3 further phases of land. And you'll see that those 3 phases are wrapped around the first phase of our delivery and an existing industrial estate. Phase 2, which is 600,000 square feet or thereabouts, is on site now with plumbing, 4 units. 1 unit presold to Bond International. The other 3 also in development as we speak. We'll PC towards the back end of this year, strong interest in two of the units already. We then took options on Phases 3 and 4, and they allow us to deliver another 2.7 million square feet of development in the location. There really isn't very much further we can go at Biggleswade but having delivered [ thick ] in the 4.5 million square feet, we've probably done at Biggleswade as much as we want to. But it does show how you can roll these developments through from phase to phase to phase. So in summary, hopefully I've demonstrated we have a very significant track record and a really experienced team of people delivering these buildings for the fund -- we have massive scale. It's a really focused loan portfolio. It can deliver 40 million square feet and will do over the coming phases of development. Its major competitive advantage is, we already have it. We don't have to go out and try and find it. It's here for us. We are strapping all the bits of land to it slowly, judiciously. But we've got the raw material and land is a short supply product at the moment in our sector. It's in the huge range of locations. We can satisfy occupiers across the U.K. and the configuration of the sites means that we can satisfy lots of different supply and demand in terms of sizes. And we know from a planning perspective, we're working through the gears, not against the system, but with the system. And lastly, importantly, it's very, very capital efficient. The options allow us not to have to burn lots of capital and then sit with a coupon running on it. We draw the land when we need it, when we're ready for it and when we want to develop it. So in summary, it's the best positioned portfolio, and we've got the best team to capture its value. Thank you very much for listening to me.

[Operator Instructions] We'll begin with questions from the webcast. First one from John Munge at Highclere International. Would like to know our thoughts on construction cost inflation and the impact, if any, on development margins.

Do you want to take that first or should I?

Yes, why don't you start, Andrew, to talk about on the ground. And then perhaps Frankie takes over on the yield on cost, is that okay?

Yes, sure. So thanks for the question, John. What we're seeing, and we had one of our cladding suppliers in actually last week, their MD. We're being advised in terms of supply, material supply, we're achieving steady state over the course of the next quarter. That's a response to them diversifying their supply chain and them also having a better visibility of our requirements going forward. So we think that the material piece is starting to soften. They and we're concerned about labor. There seems to clearly be a push through on labor availability, and there will be some volatility around that. We've seen -- the slide I put up earlier showed a view of around 20% cost inflation. That's something that we've been working really hard on to control and minimize, but it's there and it's real. We can't hide from it. So in summary, yes, there is inflation. Yes, it is causing us to have greater costs. That cost is managed by the fact that we are able to rely upon the fact that rental growth is real and yield compression has also helped. There has been some program prolongation. So we're talking about 12 months where a smaller building would have been shorter, maybe 8, 9 months. But as we're not focused specifically on the smaller buildings, that's not so much of a bump in the road for us. It's a constant management process and one that we're very alive to and will continue to be working on, on a day-to-day basis.

Just to provide some portfolio context to that. As Andrew mentioned, it's important to recognize that both rental growth and yield compression are compensating for a large part of that cost pressure. So from a yield on cost perspective, we're still very comfortable with our 6% to 8% guidance, and we'll continue to target that. I think that's probably it on yield on cost.

Just to wrap up, I think picking what Andrew said, because we have such a large land portfolio, because we are so well known in the market, we do have quite significant negotiating power. So those contractors are keen on making sure they look after us because they know that there's a longevity of future of workflow going forward. So it does allow us to get ahead of the game, so to speak, much more so than would be the case if you were a much smaller scale of developer by way of example.

Great. The next question coming in from Nick Baker at MFS. He's asking about what we do differently for development certified as net 0, i.e., change in design, materials, energy sourcing? And by how much have you typically been able to reduce embodied carbon in these buildings? And if you can give any examples.

An example is always a best way to answer a question like that. We did a building for DPD at Bicester. That had 70,000 tonnes of carbon embedded in it. We looked at the specification and we managed to reduce that by just under 10%. So the first thing we're doing is looking at specifications and seeing where we can take carbon out. Now we can't be naive. We use concrete and steel to build our buildings. And there's no way of getting away from that. So the next thing we do is we use carbon credits from accredited sources as a way of offsetting the carbon that we place into the environment. And we keep a constant look at how we can reduce carbon in the buildings that we're building and the products and materials that we're using, that's really as much as we can do, but we continue to monitor it on a month-by-month basis.

Great. And any further questions from the room just before we move on to our next area. No? Great. I'll hand over to Phil.

Good afternoon, everybody. My name is Phil Redding. I am the Director of Investment Strategy at Tritax, and I joined the business just over a year ago. I've been working in the industrial sector now for over 30 years. 25 of those years with SEGRO plc. Of the last 9 years, which I was the Chief Investment Officer. For my section, I want to bring together some of the themes already discussed by Mark and Andrew to provide an overview of the entire land portfolio, the dynamic nature of the portfolio and what we think the program is capable of delivering over the next few years. But before moving on to that, I just want to recap on the development activities in 2021. 2021 really was an exceptional year, underlining the development business and how it can generate value. The table of completions shown here clearly demonstrates the scale of the program the very prime nature of the investments being created and a significant amount of new income being generated. And as Colin highlighted, while at the start of the presentation, all the 3.6 million square feet of development completions were derisked, being either pre-let or let practical completion and to a roster of world-leading customers that reflects the very high nature of these buildings, high quality in terms of location, specification and configuration, but also in terms of their market-leading ESG credentials. And the program also delivered in terms of performance with profit on cost and development yield metrics, both in line with targets, making a significant contribution to the overall performance of the business. In addition, 4 schemes commenced construction towards the end of 2021, totaling 1.3 million square feet with a number of potential new leasing deals well progressed at year-end. And taking a step back in the development process during the year, 3 million square foot of new planning consents were secured, replenishing the consented land hopper with progress also made in advancing the planning status of existing consents. So as the 2021 performance clearly demonstrates, allocating the majority of capital to the development channel remains a very productive use of our funds and maximizing this opportunity will remain a priority of the business. A key factor of this opportunity is having control of over 2,000 acres, with the potential to develop around 40 million square feet of space. And Andrew has said, this is the result of over 10 years of hard work. This market position provides us with a real advantage that is very difficult for our competitors to replicate. The 2 pie charts on the slide show the land portfolio by ownership on the left and also by planning status on the right, both paint a similar picture securing a detailed planning consent will trigger the drawdown and acquisition of the land. As of this month, 83% of the land portfolio was held by a long-term option agreements with only 8% actually owned. The owned land will either have buildings in the course of construction or site infrastructure works ongoing. A further 9% is in the process of being drawn down, essentially replacing the tranches of land that have been already developed out. And outside of the current land portfolio, so not shown on the pie chart, new land options also representing around 9% of the portfolio are currently under negotiation. If successfully agreed, these will in turn replenish the options that have been exercised and be added to the future development pipeline. This dynamic process creates a rolling program of new development opportunities and maintains the overall potential held within the land portfolio. The land utilization rates shown in this snapshot comfortably caters for the 2 million to 3 million square feet estimate for average long-term delivery, but optionality exists to expand these rates to meet the higher level of near-term development activity that we are currently anticipating. The key benefit of our approach is that it gives us a very capital-efficient development model, combined with the ability to accelerate our development pace if market conditions are right. Now Andrew has already touched on the benefits that the scale and diversification of the land portfolio brings, and you can see that illustrated here. The left pie chart shows exposure to several U.K. regions, but with a focus on the most active markets in the East Midlands, the Northwest and the Southeast. The right pie chart shows the range of unit sizes currently assumed on scheme master plans. Now these will clearly evolve to meet occupier demand and as layouts and configurations become more certain that they're indicative of the overall target profile we are looking for. As this demonstrates, the development portfolio can accommodate a range of units from 40,000 square feet up to 1 million square feet. Providing a reasonable exposure to smaller and midsized units that's nearly 70% in the larger 250,000 square foot to 1 million square foot range, which is aligned with the wider investment portfolio strategy. The end result is our diversified portfolio that maximizes the quantum of development and scope of occupier solutions across a number of prime locations in the U.K. The previous pie chart provide a snapshot of the portfolio at a given time. But in reality, the land portfolio is dynamic and constantly evolving as sites and projects go through the planning and development process. The goal of this dynamic model is to create a rolling program of consented land, running off the planning conveyor belts, ultimately producing a continuous flow of buildings under construction and pre-let development. To provide a bit more granularity. This chart breaks down the development program into the 3 buckets that you will be familiar with from previous reporting. The current development pipeline including the projects under construction. The near-term pipeline, which we have now split into anticipated development starts over the next 12 months and then starts over the following 24 months. And the future development pipeline, comprising the strategic land portfolio that is further back in the planning process. As you can see, in addition to the 1.3 million square feet already under construction and in response to the greater visibility of occupier demand, we expect to accelerate development starts in 2022 to around 3.7 million square feet. In the following 2 years of the near-term pipeline, we expect activity to revert to be more in line with the long-run average of 2 million to 3 million square feet per annum. We will, however, be looking to bring forward planning consents where we are able and also consider enlarging the quantum of drawdowns where this flexibility exists. This is to provide optionality to continue the higher level of development if occupier demand stays at the levels currently being experienced. In other words, we will seek to maximize the opportunity that is in front of us now, whilst also carefully managing the risk. The following slides provide a bit more detail on the individual pipeline, and I will start with the last bucket first, being the schemes we currently have under construction. As just mentioned, the current development pipeline totals 1.3 million square feet in 4 speculative schemes shown here in the table. We have already secured 2 early lettings at one of the schemes prior to construction starts, taking the pre-let element of this program to 21%. This is a great example of our engagement with occupiers at an early stage in the development process to derisk speculative development. And assuming these favorable market conditions continue and on the successful lease-up of these speculative schemes, we do intend to maintain an element of ongoing exposure to speculative development as part of the overall development mix. But to be clear, the main thrust of marketing activities will continue to be focused on securing pre-lets. And on the subject of pre-lets, just after year-end, we started the construction of the 550,000 square foot pre-let to HarperCollins in Glasgow, taking the current under construction program to 1.9 million square feet. In addition, we have an agreement for lease on around 400,000 square feet currently under offer, which we expect to sign imminently with this project also expected to start shortly. This will take the under construction program to 2.3 million square feet, of which over 50% will be pre-committed or under offer. And to give a bit more color on this, let's look at the first scheme on the table, Symmetry Park, Aston Clinton. etch red, the aerial photograph here, which provides a good example of our approach to speculative developments, as outlined earlier by Andrew. In particular, the development of high-quality units that are aligned with occupier demand and visibility of potential occupiers before committing to a construction start. Situated in Buckinghamshire to the north of the M25. Aston Clinton has already been a successful development for us with the first phase built in 2019 fully let with Apple taking a large part of the scheme. For Phase 2, the original consent was for a larger format scheme, but we subsequently amended this to comprise 3 smaller units to reflect our latest market intelligence and occupier discussions. This decision has proven well founded. And as Andrew has said, we now have 2 units totaling 276,000 square foot let prior to the commencement of construction, representing 71% of this Phase 2. There is strong interest in the last remaining unit to an occupier who is already a customer in the portfolio. And so we are hopeful that all units will be committed prior to completion of the phase scheduled for quarter 2 this year. And with this level of occupier interest, the performance metrics produced in the development appraisal are expected to be comfortably delivered. Moving on now to the near-term development pipeline. The large and diversified nature of the development portfolio provides the development team with unrivaled insight into occupier requirements across the U.K. This has led to increasing our visibility of potential near-term development activity. The table on the right shows where we think this activity is likely to commence during 2022. Now I should highlight the development process is very fluid, occupier requirements change and planning timescales are uncertain. So whilst we do have confidence that we can accelerate development activity to the 3.7 million square feet of starts shown here, the actual composition may be slightly different. Not only are we seeing occupiers engaging earlier in the construction process, as I have highlighted at Aston Clinton, increasingly, particularly for larger requirements, occupiers are also looking to engage earlier in the planning and land preparation process. A key concern for occupiers is certainty of delivery. This means they want to partner with developers with a strong reputation and track record, who have access to a well-located land bank and who have expertise and proven skills in delivering high-quality products on time and on budget, and we stand second to none in this regard. This allows us to engage with occupiers and commit to the delivery time scales with a high degree of confidence. Symmetry Park, Rugby provides a great example of how the combination of a fantastic site and our approach can maximize development opportunities. The scheme at Rugby represents a rare opportunity to create a large ring-fenced distribution park in one of the most sought-after locations in the U.K. The rarity is derived from the very prime location and size with the potential to accommodate 3.4 million square feet of warehouse develop when fully developed. We currently have negotiations ongoing with a number of different occupiers on all of the units across the 1.9 million square feet of Phase 1. We therefore anticipate accelerating the land drawdown to encompass the whole of the phase and to commence development on around 750,000 square feet during 2022. And we expect this momentum to continue with a further 500,000 square foot developed out in the following 2 years, the majority expected to be pre-let or let during construction. We will be starting shortly on 2 speculative units at the entrance of the estate, but with active discussions ongoing with a single occupier to lease both of these units, it is likely the scheme will be leased prior to construction start. If the current interest gets converted as anticipated, we will quickly turn to the promotion of the Phase II land, hopefully by the end of this year, which has the potential for a further 1.5 million square feet. Rugby is a great example where the scale of the site, the prime location and the flexibility provided in the option agreements all combined to allow us to accelerate the planning and development programs in response to the higher level of occupier demand we are currently experiencing. So taking a step further back in the near-term pipeline. The table here shows the anticipated development starts in 2023 and 2024. And as per the earlier caveat, the actual composition of the pipeline will undoubtedly change over the next 12 months or so as planning scheme layouts and occupier requirements all evolve. The objective of this category is to maintain the supply of consented development opportunities by replenishing the land that has been utilized through the exercise of options and land drawdowns. As Andrew has outlined, in part, this is undertaken through the promotion of our sites through the normal local plan process typically on a 5-year planning time scale, but also by partnering with occupiers to jointly approach local authorities to present customer-backed development proposals on land not yet designated in the local plan. The objective being to fast track development consents outside the formal development process. This strategy has been successfully adopted in a number of cases, for example, Bond International taking 112,000 square feet in Biggleswade, in support of bringing forward the unallocated land on Phase 2, which is now under construction. We are able to execute such strategies as these due to the strong relationships built up over many years with a range of stakeholders, including local authorities, land owners and occupiers and the high-level engagement maintained through the life of the development projects. This partnership approach aimed at bringing forward more rapidly the release of strategic land is also being adopted at our site at Oxford North. Oxford North located just off Junction 9 of the M40 covers 161 acres and has the potential to accommodate up to 2.3 million square feet of development. We have an extremely good relationship with Cherwell, the local authority, built up over many years, having delivered a substantial amount of space within the district at Banbury and Bicester. And as Andrew has said earlier, local authorities will look more favorably upon applications when it is more certain that jobs and other economic benefits will be delivered swiftly. And this is exactly the approach being followed at Oxford North with an important local employer looking for a new 400,000 square foot facility on part of the scheme. At Biggleswade and here at Oxford North, the completed developments are being sold to the occupier. And while freehold sales are not a core part of the strategy, a pragmatic approach has been adopted because of the significant benefits such partnerships bring in terms of establishing the principle of development on the site and also of accelerating the receipt of development profits. The aim of this approach is to set a key planning precedent and place the site in a strong position when the local authority considers releasing further strategic land. The final category is the future development pipeline, which comprises the strategic land portfolio, largely held under longer-term option agreements and at earlier stages of the planning process. Andrew has outlined in detail the intricacies of the option process, so I only want to reinforce 2 points. Firstly, securing options is not easy, securing options that go on to achieve a planning consent is really not easy. You need a deep understanding of how local plans work, how they will evolve, the pluses and minuses of various competing potential development sites as well as strong relationship with a range of invested stakeholders. And as I have mentioned, these are things we are all extremely good at. The second point is that we do intend to broadly retain the size and potential of the strategic land portfolio. The team is, therefore, looking to secure new land options to replace those that have been successfully exercised. As I referred to earlier, at the current time, there are ongoing negotiations on option agreements relating to land capable of providing 3.6 million square feet of development across a number of locations and representing around 9% of the current land portfolio. So to conclude my section, a quick summary. The land portfolio, primarily held by a long-term option agreements, minimizes risk, capital exposure and allows the controlled release of development opportunities aligned to market demand. In addition, the diversified nature of the portfolio maximizes the potential size of the development program and also the scope of occupier solutions. The scale of this portfolio, which has taken many years to put together is incredibly hard for competitors to replicate and provides us with a very attractive market position now and into the future. And the ongoing strength of our market means that we can accelerate the near-term development pipeline, through a balanced mix of pre-let and speculative development. Finally, we are successfully replenishing the amount of consented land and adding new option agreements to maintain the overall potential of the land portfolio. Thank you very much.

Great. Phil, thanks very much again, we'll open up for Q&A. And again, a couple of coming through on the webcast. The first one actually asks how feasible would it be to assemble your land bank from scratch today?

Yes, more one for Andrew. But as I said, I think it's taken well over 10 years, sort of 12 years to do that. So certainly not easy, but I think Andrew is probably -- if he was given that task of building that portfolio again, how long would it take?

I'd probably retire to be honest. Not feasible is the answer. It's very hard to build the relationships to take from the land bank. It's very hard to take it you through the process. So a new entrant to the market today and the new entrants are not necessarily trying to do options, they're trying to buy land at retail value, and that's very expensive. So they have to go very fast to make their developments work and be profitable. So I think it'd be huge a chance and it's not one that I relish taking up.

The majority, of course, of that land bank was secured at a time where there was less competition in the market. I mean, it's ferocious now. So it's a completely different prospect, if you're embarking upon that today. And that's one of the reasons why we're so excited about what we have and why I said earlier that we're not reliant on the broader market to create these quality investments in the future.

And I think sort of following on that theme, Tom Jemmett at LGT Vestra asks what sort of premiums are you paying for the land, given that it's in short supply? And are you seeing pressure as a consequence?

So this is great. I'm so glad I came quite. The options that we have are options that allow us to draw the land down as if the market value was a discount. We do pay an option fee when we engage with that. And that's I think we've already identified less than 5% of the value. And -- so the rest of it, we don't wish them to be slightly obscure. It's really commercially quite sensitive to us, and I wouldn't want to go into it in the great detail. I'm sorry.

The key thing here, I think, is that if you're sitting there today and you do not have a big pipeline of land available to you at various stages of the evolution, as we've explained that we've already got with a significant amount of that land already subject to planning consent, then your only option is to go out and buy land that either has planning or is about to get planning. And if you're going to do that, you're going to pay top dollar. Now that is where we're really, really fortunate because we have a land bank that is at all those points of evolution. And that means we don't have to pay top dollar because, as Andrew and Phil explained, as we are developing land at the front end of our business at a discounted rate because we have the benefit of options, we're then replenishing that by adding more land subject to options at the back end of our planning bucket. And that means that the evolution hopefully will continue if we replenish that and we can continue, therefore, doing it at a more attractive pricing point.

It's quite labor intensive taking this land through the planning process. It takes a lot of skill and that's not easily acquired off the peg either. So the skills embedded in the team that have been built up over more than a decade are really quite pivotal to the success of that land delivery model.

Great. Well, this question is directed for you, Phil. So you're going to have to answer it. The occupational environment seems very strong. How long do you think you can maintain an elevated run rate? And how fast could you go?

How fast could we go? Well, I mean, I think based on the current visibility that we have, we are comfortable to increase the guidance from the 2.3 million long run average to the 3 million to 4 million square feet that we are -- that we currently can see. And what I mentioned also in the presentation, we're also looking to position the land bank to be able to maintain that sort of delivery subject to market conditions continuing. Also as part of that, we referenced a couple of sites there, Rugby and also there was a mention of Kettering, where we had drawn down quite large areas of land to give us flexibility, which does allow us to accommodate some of the bigger pre-let requirements, so up to 1 million square feet. So we can do a little bit more. But at the current time, and based on current visibility, we think the guidance that we've given is appropriate.

Great. A question that's come in. And this is from Robert NFU Mutual. I would have thought your occupiers know their networks have operation directors with plans. What additional data do you have over occupiers? And how much of that is you leading discussion versus large occupiers coming to you? So...

I think it's -- occupier's visibility of their networks, I mean we've done a lot of work on that recently. But I mean the work was done by Mark. So I think he's in the best position to answer that.

Yes, I think we've seen a different engagement with occupiers and those operational teams. So typically, they would have come to us quite late in the process 9 to 12 months out of wanting a site or wanting to move, recognizing the lack of supply in the market, those operations directors, yes, our networks match maybe the same as theirs, but they're now looking 2, 3, 4, 5 years out in terms of when that requirement is going to realize. So they're happy to join us in terms of going in for planning consent on a site and making sure they do secure the right asset in the right location. So I think we are having a much earlier engagement with those occupiers than historically would have done.

Great. Thanks so much. If there are no questions from the floor, then I think we'll hand over to Frankie.

Good afternoon, everyone. And for anyone that doesn't know me, I am Frankie Whitehead, and I've been the Finance Director of the company for the past 7 years. So we've heard a lot of positive and exciting news this afternoon about our development program. And my job is to spend a few minutes putting all of this together and to provide you with an update on our financial guidance. And it is driven by how we see the current level of occupier demand affecting us both in the short and longer term. I'm going to start with a brief reminder of how our strategy has delivered very attractive accounting returns and also how the evolution of our market has driven our decisions around capital allocation. The top right-hand chart shows our total accounting return performance each year since our IPO. And this average is over 13.5% annually across that 7.5-year period demonstrating a strong track record of performance and one that we are confident that we can continue. As you've heard during this time, we anticipated how the supply-demand dynamics in the market were going to become extremely favorable. And with that, we saw the opportunity and the important role that development was going to play both in our future and that for our wider market. So when it comes to how we think about capital allocation, if we look at the chart on the bottom right, you can see our shift in focus from investment, which is in the gray to development, which is in the green. And this started in 2015 with us becoming a leader in forward-funded developments. And this was followed by our acquisition of Symmetry in 2019. And subsequent to that, the majority of our capital deployed has been allocated towards direct balance sheet development. As we project forward from here, we will continue to focus our capital allocation towards development because we feel that it offers the most attractive risk-adjusted returns. Whilst from an investment perspective, we will look to act opportunistically, maintaining financial discipline and from time to time, cherry-pick investment opportunities provided that they meet our return criteria. When thinking about financial returns, as we move forward, our future total accounting returns will continue to be underpinned by our high-quality investment portfolio and its associated income growth. We will look to supplement this through active asset management and then further enhance this via our development activity, which is obviously a key differentiator for us. We're therefore confident of maintaining double-digit total accounting returns over the medium term and into a stabilizing unit environment. The acceleration in activity means that we are upgrading our development guidance for 2022. Our longer-term guidance remains, which is to target the annual delivery of 2 million to 3 million square feet per annum and to deploy GBP 200 million to GBP 250 million per annum into development. As you can see in the 2022 column, due to the notable increase in occupier demand that you've heard about, we're now targeting development starts across 3 million to 4 million square feet of space and the deployment of GBP 350 million to GBP 400 million into development this year. From a yield on cost perspective, despite the inflationary pressures, both on raw materials and on labor, we're still comfortable of that 6% to 8% yield on cost range both in the short and in the longer term. As Andrew touched upon, we have been in an unprecedented position in terms of cost price inflation. We continue to manage this well internally, although through a combination of rental growth and also yield compression, this is mitigating a large part of that cost pressure from impacting on our performance targets. However, it does mean that we are seeing some slight downward pressure on our yield on cost targets versus 12 months ago. But these still remain within the 6% to 8% target range. More recently, we've seen some cost stabilization, and we expect to see some of these pressures subside over the next 6 to 12 months as global supply chains start to unlock. Over the longer term, we do expect rents to outpace any future build cost inflation. Therefore, allowing us to regain some of this pinch that we felt from a yield perspective. But irrespective of what I've just said and noting the healthy yield arbitrage between this and today's prime investment yield, development is still a very compelling channel for us in terms of our future financial return. When we think about disposals, we will look to prune our portfolio over time, focusing on those assets, which we believe may underperform or which may carry more inherent risk. Whilst we have identified some assets for sale due to the fluidity of yield compression over the last 6 to 12 months, we believe that not selling during this period has led to stronger performance overall, but you should expect us to recycle some capital from our investment portfolio during the course of 2022. Now we can see the benefit of this acceleration feeding through into our rental income figures. I've presented this chart before, and it sets out the trajectory of our passing rental income over the near term. We now have greater visibility beyond the GBP 219 million rental income bar as seen here in yellow. And this figure is very similar to that set out at our last results in August. In terms of the progress that we've made since then and starting on the left-hand side, there was GBP 14 million of income secured under pre-let agreements last June. Those buildings are now complete, and this income is now passing. For the purposes of the portfolio reversion, we continue to quote the June position of 6.5% or GBP 12 million. However, we expect this to have improved during the second half 2021 and we will announce those figures as part of our December results. Continuing to move across the GBP 8 million, which was under offer at the time of the interims. This is now being secured under letting agreements and around GBP 4 million of this is also now passing. In terms of the assets under construction last June and the GBP 4 million ERV, these are all progressing according to time table with approximately 50% of this let during the construction period. We also messaged that we had plans to commence further construction during the second half of last year. And these assets totaling 0.7 million square feet are all now underway and have the ability to generate a further GBP 6 million of rental income. And there is currently lots of strong interest in these buildings, all of which gets us through more certainty to that GBP 219 million income bar. In addition to this, and when looking at the green columns, this sets out our progression within the pipeline. We're also under offer on a potential pre-let, representing a further GBP 3 million of income and in terms of our near-term pipeline with construction starts within the next 12 months. We are confident around the return profile that these assets can deliver to us, and we have increasing visibility over a further GBP 20 million of potential rent. In terms of timing and with respect to the green columns in particular, these buildings are targeted for delivery by the end of 2023. And therefore, will start to impact earnings through 2024. When we think about the [indiscernible] trajectory, it will be one linked to construction time lines and generally speaking, one should factor a 12- to 18-month period between construction commencement and income generation. And finally, when looking at that end column totaling GBP 483 million. This shows the future potential that we see within the land portfolio. And as Colin said, we have the ability to more than double the size of the portfolio. So there is still a huge amount to go for. And just to remind you that we do not factor any future rental income growth into any of the figures on this slide. You've just heard Phil discussed the benefits of freehold land sales and in what circumstances we would consider doing this. In these instances, we would typically look to structure a sale so that we retain the development management services, i.e. the management and delivery of that particular asset or scheme. In doing so, we would command a development management fee or a profit share. This development management income is recognized across the construction period and appears as other operating income within our financial statements. Again, it is efficient in the sense that no TBBR funding would typically be required and it's reflective of the experience and the skill set within our wider development team. From a REIT perspective, this income is not considered property rental income. And therefore, there is no 90% distribution obligation that sits alongside it. The DMA income is more variable in nature, and therefore, it's more challenging when it comes to forward guidance. Whilst we're guiding to between GBP 3 million to GBP 5 million per annum over the medium term, there will be periods when we fall outside of this range. In terms of how we think about the relationship between this form of income and our dividend. We will only factor DMA income coming to our dividend thinking at levels within the range identified, so as to remove any potential volatility. And therefore, any excess will be reinvested into that development pipeline. So whilst this is all very exciting, we remain extremely diligent when it comes to managing the risk profile of the business. At a portfolio level, development risk is managed with reference to our investment policy limits. We are currently operating well within those limits, with total speculative exposure at 1.6% and total development exposure at 8.3% as at the end of December. Our use of land option agreements provides embedded protection in the sense that there is limited capital required both to secure the option itself and prior to achieving planning consent. When considering our speculative program whilst this forms an important part of our wider development strategy, we are conducting this in a targeted manner. Andrew touched on this, but when we decide to push the button to undertake speculative development, this is whilst in dialogue with multiple occupiers and therefore, with a clear line of sight over the return parameters for that particular building or unit at the point that we signed the fixed-price build contract. From a balance sheet and financing perspective, there is no change to our loan-to-value targets of 30% to 35% over the medium term. And as the right-hand chart shows, we are most comfortable at the bottom end of this range. This is something that Moody's also recently recognized. And you'd have seen us announce an improvement to a Baa1 rating with a positive outlook. And in my view, this bodes well for a potential move into the A ratings in the future, which will have a favorable impact on our overall cost of capital. We are currently sitting with strong levels of liquidity at approximately GBP 600 million as at the end of December. It's important that we continue to have a good range of funding options at our disposal. This provides us with flexibility and optionality as we look to develop what is currently an approximate 10-year pipeline. When we look back over the last 18-month period, we have issued a GBP 250 million green bond. And we will continue to look hard at opportunities to link our ESG targets with our wider financing objectives. We have realized GBP 134 million through investment sales. And most recently, we issued a GBP 300 million of new equity to support the accelerated development plans. The key consideration within all of this is making sure that we could take advantage of the opportunity that we're seeing and that we're generating whilst managing our capital structure in the right way, ultimately with a view of maximizing shareholder performance. So in summary from me, we are extremely well capitalized heading into 2022. And this means we are very well positioned for the opportunity in front of us. And as part of this, we are increasing our 2022 CapEx guidance, targeting the deployment of GBP 350 million to GBP 400 million this year into development. At the same time, we are carefully assessing and evaluating risk. But the scale of our development platform is unique. And coupled with the market dynamic, this means that we have confidence in delivering sustainable income growth alongside attractive total returns into the longer term. Thank you very much.

Great. Thanks, Frankie. Again, we'll just step up for Q&A now both from the webcast and from the floor. [Operator Instructions] First question then, Frankie, from Neil Green at JPMorgan, asking about how we should think about earnings growth over the next few years?

I would break that down into the 3 key drivers in terms of earnings growth. So if we start with the investment portfolio, obviously, that's the core part of the portfolio and the like-for-like income growth that we'll be expecting to come through there. Just to remind everyone that we've got a nice blend of review provisions. Some of those fixed, some of those linked to indexation and some of those open market linked. To give everyone a flavor, some of the more recent open market reviews settled remembering they're 5-yearly backward looking, have been generating around a 3% growth rate per annum. Noting the upward pressure on the open market rental side that we've heard about and heard from Kevin about and where indexation is, we would expect that to trend upwards going forward. Then we overlaid the asset management piece that I mentioned. That will be more ad hoc in its nature. And then, of course, the top slice, which is very powerful, which is the development piece. So maybe if we look back at that income growth slide that I mentioned on Slide 62, that sets out around 20% of income growth over a 3- to 4-year period, and we've got real visibility on that at the moment. If we break the 20% down into what we think will translate into earnings broadly 15%, and therefore, trending around 3% to 4% per annum through development as well. So if you pull all of that, obviously confident of delivering some very attractive levels of earnings growth over the short to medium term.

Next question in, asks about the land options, how they are accounted for and value, please.

So in terms of accounting, under IFRS, the land options are held on the balance sheet at historic cost. Within the EPRA NTA metric, those land options are mark-to-market. So there's a mark-to-market adjustment that you'll see within that. At the point that those land options convert into a real land holding to an interest in land, they come onto the balance sheet at fair value, and any accretion will come through in a normal way. Yes. So beyond that, it's fair value. I think the important point to flag is that the way the valuers look at the options, particularly, is until you have an interest in land, they do apply a discount. So in theory, if you're sitting there with an option with planning consent that you have a right to draw down tomorrow, there is some embedded value within that, that isn't currently being recognized within the NAV.

Great. And sort of related question, I suppose, from Marcus Phayre-Mudge at BMO. Asking us about how -- please remind us how the valuation of a land plot evolves through the planning process and the book value accretion that creates.

Joint-up approach. I mean there's 2 principle points of value creation and Andrew highlighted those. One at planning and one typically at the letting stage. The valuers will adopt a DCF when it's at land option stage. Looking at those future cash flows, they will apply a discount rate and they will also apply a risk factor. So it's heavily discounted at that stage. As you draw the land down and move into land ownership phase, it then becomes a standard residual valuation. So that's how that would move. And obviously, the further you get beyond that, the less risk and the more profit that will come through under the valuation. Anything to add, Andrew?

I think you answered the questions perfectly. Thank you.

Yes. And Once building is let. Say, for instance, on a pre-let, it then comes on to our balance sheet as essentially as an investment product. So you see that uplift occur then. And of course, as Kevin mentioned, as we're seeing on the ground, more of our buildings during the course of speculative development are being let up earlier as well. So there's that value accretion capture not necessarily at the end of the construction phase, but sometimes during the construction phase.

Great. Fantastic. A question from Solomon Nevins at CCLA, asking about the inflationary pressures. And should we expect some developments to still complete at the upper end of the yield on cost range?

Yes. I think we touch on this. The broad answer is that we have got developments that appear fully within that range. So some at the bottom end, something at the middle, some sat at the top. So yes, depending on location and the market dynamic in that particular space and the tone of rental growth we are still seeing future developments within our appraisals or within the range that we've given.

Hence, whey we haven't adjusted that. I mean we haven't looked very carefully at it. And so we haven't adjusted that range. But I think it's fair to say, Frankie, that the average has moved down a little bit come under pressure as a consequence of this cost price inflation.

And then a couple of questions. I'm going to keep you on your toes here a little bit because there are a variety of topics have come in. But first question from Fred Heaton, at IW&I. As you develop the back end of the pipeline, why will land owners sell to you via options as opposed to cash offers at retail value?

It's for Andrew, definitely.

Thank you. Because the option agreement that we wrote with them gives us the ability to draw the land down at a market value lesser discount. So it's not within the landowner's gift to turn around and say, "I'd like to sell it to somebody else."

The simple fact is that remember that the landowner does not have truly marketable asset at that stage for anything other than agricultural use, right? So what we're bringing to the table is the skills and the work that go in over a material period of time, as Andrew talked you through, to take all of those steps to get to the point where we can add value through the delivery of planning. And at that point, the landowner obviously gets a significant benefit in the value of its land. So what the landowner is essentially saying is, "Okay, Tritax please come along and add value to my land." And as Andrew said, they can continue to use that land in the time frame. If they're going to sell that to someone hoping to get full value for it on day 1, well, they don't have an asset that they can market in that way because it doesn't have the benefit of planning. Anyone buying it we'll have to put in that time and expertise. But as Andrew has also said, it's the intelligence that you need, an experience that you need to identify those sites, which have the capacity to get planning consent and to be high-quality developments at the end of the process. And that's what we bring to the table.

Great. And then another question Solomon at CCLA, he's asking about the planned increase in development activity and how that sits within the company's investment policy and how do you expect to fund the extra developments?

In terms of the investment policy limits, as I set out, we're firmly operating within those. We obviously do a lot of projections going forward and we're comfortable that we're not going to be breaching any of those investment policy limits, and we were able to undertake the level of development activity as set out. In terms of financing, we obviously came to the market recently for new equity to help accelerate this. We're sitting with lots of liquidity at the moment. So that will certainly see us through this short to medium term. And again, as I set out in the presentation, beyond that, it's all about having options and having flexibility and pulling those levers at the right time, ensuring that we're maintaining our capital structure, but ultimately with a view of delivering maximum performance.

Reminding everyone that there's a 15% limit to develop the land exposure, of which a maximum 5% can be focused on speculative development.

A couple of questions, probably relating to some of the earlier parts of the presentation, one from Mike Prew at Jefferies asking, will future developments be at the same historic levels of site coverage? Or will they shrink with evolving transport requirements?

I guess that's for me to answer. So thank you, Mike. The answer is, it's evolutionary. And we're seeing some occupiers wanting to have actually more dense sites and some wanting to have much less dense sites. And it really relies upon the use of the building by occupier in its, really, granular sense as opposed to it being logistics in its wider sense. One of the great benefits we have is because the portfolio we have can flex to occupier requirements, we can meet those requirements quite easily. And then it's about achieving a pricing point that works for us and works for the occupier and we've got a couple of -- [ loads ] of ongoing negotiations which are really quite interesting at the moment.

Okay. And then I've been dying to ask this question. There seems to be a lot of focus in the news regarding drone deliveries. Is this being factored into your thinking? Are you seeing this the -- from occupiers? Is this a real thing basically?

Yes, it's not -- again, having sort of come from the occupier, well, I think it's quite a long way off in all reality in terms of taking a lion's share of deliveries. The occupiers I'm talking to how much more interested in terms of alternative fuels and is it going to be hydrogen, is it going to be electric, in terms of commercial vehicles moving forward and making sure there's provision within the solution and whether that's [ ducting ] under the yard and the ability to charge vehicles in the yard. That's a much bigger topic for conversation than drone deliveries.

And then this has just come in from Tom Horne at Berenberg. The 10.3 million of inquiries and final negotiations, how much of this rate is to existing or built assets and how much of that is likely to be pre-let?

In terms of the pre-let figures, we're looking at the GBP 3 million to GBP 4 million is the guidance that we're giving for 2022. So that is across not all the 24 schemes because obviously, at different stages of evolution, but probably sort of focused on 8% to 9% of the main Symmetry schemes at the moment.

Great. Brilliant. Any questions in the room? No, I think -- that is the end of the questions, Colin.

Okay. Thanks, Ian. So to conclude, everyone, this is a recap really on what we've heard this afternoon. Firstly, you heard from Kevin. Kevin's data showed record lettings and record vacancy in 2021 and increasing requirements across the U.K. against rising demand as an acute shortage of supply. And consequently, Savills is forecasting higher rental growth, and this is heightening investment demand with a wall of capital that has the potential to further compress yields. The strength of the market was reflected by Mark. He reported over 26 million square feet of live inquiries across all of our sites. And Mark also explained how we are very customer-focused and intelligence driven with a proactive approach to capturing lettings. This stems from a deep understanding of supply chains with demand for our developments coming from our existing customers and also a broad range of new relationships. You heard from Andrew that we have strong reputations with councils, with landowners and contractors and that over a decade of work put in by our team has firstly created the U.K.'s largest logistics land portfolio of over 2,000 acres. And secondly, has embedded significant value in our land platform, which we're now delivering at a really attractive yield on cost of 6% to 8%, in which, of course, as Phil mentioned, is a really attractive premium over prime yield rates. Our land portfolio is geographically diversified and held in a really capital-efficient manner through options. And this position is virtually possible to replicate in the current market in the near term, as you heard in the question session earlier. And it's worth reminding ourselves that 40 million square feet of development potential is entirely within our control. We're not reliant on the market for the supply of land or the provision of new investments, which we can create much more attractively in-house compared to the yields that we would have to pay if we went out to buy those investments tomorrow. And that's what you're seeing as being very, very selective on the investment side in our activities as well. And Phil explained that we are targeting GBP 2 million to GBP 3 million square feet per annum of development starts over the long term, but accelerating that cadence to target 3 million to 4 million square feet for 2022 in response to strengthening occupier demand. We're building lettings ever more quickly. During the construction process, we've responded by increasing the level of speculative development. But of course, pre-lets being the primary focus in the long term. Now at the same time, our increasing planning success replenishes that near-term planning pipeline as we achieve lettings and also allows us to offer a range of sites to meet customer demand confidently over the course of the next few years. Now to capture these enhanced returns, Frankie outlined how we are applying a really disciplined approach to our development process, noting that we're very well funded and that there's now increased visibility, enhancing our income delivery within the development platform. So it's no coincidence that we are now standing at a really strong position. Our approach to acquiring and controlling land and the development process was deeply researched and it was very carefully planned. And our strategy, as you heard me say earlier, has been designed to align with a really positive structural economic drivers that are benefiting our sector right now. In short, we are at an inflection point where our development portfolio is now delivering and our confidence in the future value delivery has heightened. So our excitement and enthusiasm from being here where we are now at the right place, at the right time, with the right strategy, the right product and the right team to unlock that value and we're doing it right now. So that concludes the presentation today, focused on development. I hope you found it interesting. I'm just going to hand over to Ian, who might just want to wrap up in terms of any house issues. But to those of you on line, I really appreciate you joining us this afternoon and particularly for those joining us in the room. Thank you very much.

Thanks, Colin. And yes, just to wrap up very quickly. Thanks again for joining us.