(Bloomberg) -- Blackstone Group Inc. funds have offered to buy St. Modwen Properties Plc as the private-equity giant chases a bigger slice of the U.K.’s red-hot warehouse market.

The British developer said it’s likely to accept Blackstone’s indicative offer of about 1.2 billion pounds ($1.7 billion) should it be made firm, according to a statement Friday. St. Modwen stock jumped as much as 20% to 538 pence in early London trading, close to the offer price of 542 pence a share.

Competition for warehouses across Europe has intensified as global investors including Goldman Sachs Group Inc., Cerberus Capital Management LP and GIC Pte bet on rising rental income fueled by demand from e-commerce retailers as the pandemic moved more shoppers online. That’s prompting rivals like Blackstone to turn to more complex deals including snapping up public companies as they look to build their warehouse portfolios.

U.K. warehouse lease agreements reached a record in the first quarter, 40% higher than a year earlier, according to CBRE Group Inc. That’s seen the asset class easily outperform any other type of commercial property.

Blackstone has been racing to scale up its Mileway unit that focuses on urban warehouse properties close to population centers that are in demand from online retailers seeking to cut delivery times. Recent U.K. deals include the purchase of a 473 million pound portfolio from Prologis Inc. In October and a 118.5 million pound deal for the Bedfont Logistics Park in March.

St. Modwen has three main business units, focusing on housebuilding, warehouses and urban regeneration. After shifting its focus toward logistics in the past two years, that unit now accounts for about 49% of the company’s 1.37 billion pound portfolio, according to a February earnings statement. The rest is split almost equally between its house building arm and the strategic land and regeneration unit which the company has been shrinking.

“Blackstone is more comfortable than most to look at take-private opportunities and St Modwen’s legacy home building business muddied the waters for other parties only interested in the logistics portfolio,” Green Street analyst Peter Papadakos said by email. “Let’s see if the share price stays above the bid price -- it may signal the public market’s expectation of a bidding war should it do so.”

St. Modwen’s strategic land unit, which buys sites and takes them through the planning process to prepare them for development, would also provide a ready supply of opportunities for Blackstone to build more warehouses.

Blackstone has until June 4 to make a binding offer for the company, under the U.K.’s takeover rules.

(Updates with share price in 2nd paragraph, other detail throughout)

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