Income from investment portfolio

Market rents and theoretical rent

The market rent was 0.6% below the theoretical rent at year-end 2016. Although still negative, the reversionary potential has improved to -0.6% from -0.9% in 2015 on the back of strong market rent growth which underlines the quality of our portfolio.

Investment portfolio, market rent and theoretical rent

Year-end (€ million)

2016

2015

2014

2013

2012

Market rent

250

243

244

243

260

Theoretical rent

251

244

248

249

259

Rental income trends

Investment portfolio, average monthly rent

Year-end (€)

2016

2015

2014

2013

2012

Average monthly rent

882

856

843

827

806

In 2016, the average rental income per unit rose by 3.0% to € 882. The main driver of this increase was the annual rent increase on 1 July 2016 (+2.6%). Vesteda’s ability to successfully increase rents is a confirmation of the success of our strategy of focusing on primary regions and the mid-rental segment. The result of the rental increase was dampened by the impact of lower realised rents from re-lettings (-0.2%) and was positively impacted by the inflow and outflow of residential units (+0.6%).

Investment portfolio, average rental increase by source

 

2016

2015

Beginning of year compared with year-end

  

Like-for-like rental increase

2.4%

1.3%

-          Average rental increase for current tenants

2.6%

2.0%

-          Re-letting

(0.2%)

(0.7%)

Inflow and outflow of properties in the portfolio

0.6%

0.2%

Total increase in average rent

3.0%

1.5%

On a like-for-like basis, rental income increased by 2.4%. The like-for-like average rent increase is above inflation (1.0% December 2016 y-o-y) and confirms the sound inflation hedge provided by the portfolio.

The occupancy rate (in units, year-end) fell slightly to 97.8% in 2016, from 97.9% in 2015. This was mostly due to the refurbishment of units in order to achieve higher rents, in line with our strategy of rent optimisation. Tenancy turnover dropped slightly to 12.8%.

Physical occupancy rate and tenancy turnover

Realised rental income

Investment portfolio, realised rental income

(€ million)

2016

2015

2014

2013

2012

Gross rental income

242

237

237

240

243

Net rental income

182

176

176

181

177

Gross/net ratio

24.9%

25.5%

25.9%

24.8%

27.5%

Gross/net ratio landlord excl landlord levy

23.3%

23.6%

24.0%

24.7%

-

In 2016, the gross/net ratio improved to 24.9%, despite the increase in the landlord levy to 0.491% from 0.449%. The income-related rent increase for the regulated sector did not fully compensate for the additional costs resulting from the landlord levy. Excluding the landlord levy, the gross/net ratio improved to 23.3%, compared with 23.6% in 2015.