The Local Shopping REIT, which, as its name says, owns shops in local shopping parades throughout the UK, said in its interim statement today, that tenant demand is holding up well. This demand is coming both from independent traders and from national operators rolling out their convenience store programmes.

At the end of January the firm had a portfolio of 647 commercial properties comprising over 2,000 letting units, with a commercial void rate down slightly at 7.6% and a residential void rate of 0.9%. Tenant defaults have been minimal despite the economic conditions.

In the past four months, LSR have let 38 vacant units at a combined rent of £498k pa, at rates in line with the Market Rent, or, in the case of six lettings, on an escalator to the Market Rent. With existing tenants, reviews were agreed on 110 units with average 1.5% increases to levels 5% above the Market Rent.

During the period, LSR secured planning consent to convert vacant office space above shops in Weymouth and Braintree into five flats. They intend to build these out in line with their policy if they can secure an acceptable rental yield following conversion. Since 30 September 2011, they have completed five such flat conversions with a further seven under construction. Two of the completed flats have been let at a combined rent of £13,800 per annum, with the remainder being held back for sale.

LSR itself has made no new acquisitions during the period, but it's JV with Pramerica has completed on 3 properties for a combined value of £10.65 million including the Halewood District Centre in Liverpool, and has exchanged contracts on a newly-built parade in Stoke on Trent for £810k and offered on a further 5 properties worth £7.11 million. The JV will shortly have spent over £30 million.

LSR has a long term part-drawn facility with HSBC, with an 85% LTV covenant, to finance acquisitions, but the firm does not say how much headroom there currently is on it.

Mike Riley, LSR's Joint Chief Executive Officer, said:

"Our business continues to demonstrate the ongoing relative resilience of our portfolio and the benefits that our highly specialised management skills can deliver, not only to our wholly owned assets, but also to those properties we manage for co-investors and third parties. In the coming months, we will continue to apply these skills to increase the revenues from our existing holdings, while seeking to grow our assets under management through discussions with lending banks and potential joint venture partners."