Tritax Big Box REIT (LSE: BBOX) is a FTSE 250 real estate investment trust (REIT) specialising in large-scale logistics properties, with clients like Amazon and Ocado.
REITs are attractive for income-focused investors because they usually have an excellent dividend track record. Why? Because in exchange for tax benefits, they’re required to return 90% of profits to shareholders.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.
Tritax is no exception, increasing its dividends for over 10 years with only one minor reduction. Since 2014, its final dividend has grown from 4.15p per share to 7.66p.
The share price has increased 50% in the same period, resulting in cumulative annualised returns above 10%.
Now, it could get even better.
AI ambitions
In an effort to corner a chunk of the AI market, the company plans to build a huge data centre near London Heathrow airport. It has acquired a 74-acre site in Slough, a prime location to serve Europe, the Middle East, and Africa.
The plan details a triple story, 448,000 sq ft facility, potentially the largest in the UK, costing an estimated £365m.
According to reports, it’s working with an unnamed renewable and low-carbon energy company to power the project. It’ll use the existing grid to deliver an initial 107 MW and a potential second phase adding 40 MW.
The company anticipates a yield on cost of 9.3% for the first phase of the project, notably higher than the average 6% to 8% target for other projects.
Following the news, major broker Jefferies reiterated a Buy rating for the stock on Monday (3 March). This builds on another recent Buy rating from Bank of America in late February.
Any risks?
Tritax may be a leading UK REIT for now but it isn’t without risk. An industrial slow down could lead to declining demand and leave it with costly empty buildings. AI is all the rage today but it’s still a nascent industry with potential for huge losses – as the Deepseek saga demonstrated.
What’s more, real estate is a sensitive industry, prone to losses when the economy dips. Interest rate hikes can lead to higher borrowing costs, threatening profits. Navigating these risks will determine whether it remains ahead of the competition.
Thinking long term
Tritax’s new development builds on a wider strategy to benefit from the demand for data storage infrastructure, complementing its existing logistics portfolio.
But as exciting as it sounds, it may be a while before it enjoys the fruits of its labour. Construction of the data centre only starts in the first half of 2026, with completion targeted for the end of 2027.
Still, if everything goes to plan, it stands to seriously benefit from the rapidly growing data centre market. The demand for cloud storage to support AI processing is only getting bigger and doesn’t look likely to slow down. Companies are throwing cash at AI so these data centres typically offer much higher rental yields.
It may be early stages but ultimately, the returns could be substantial.
I think long-term investors with an appetite for real-estate exposure would be smart to consider the stock. It’s been on my REIT list for some time — now I plan to buy as soon as I free up some capital.
