Segro reports challenging conditions in emerging markets

Trading at Segro since the end of June had seen occupational demand remain strong. The property developer´s vacancy rate remained low and the firm saw net absorption of existing space.

From 30 June, the company had signed pre-let agreements for 188,600 square meters across Europe, which Segro expected would result in £6.0m of new annualised headline rent, while the pipeline of near-term opportunities remained encouraging.

The positive leasing trend observed in the first six month of 2016 had continued since period end, with £9.9m of new rent recorded since 30 June.

Segro´s vacancy rate since 30 June had remained at 4.8%, with £1.7m of net absorption of existing space offset increased speculative space which had not yet been let.

New rents and renewals in the UK continued to improve since 30 June, especially in London and South East, rising from 4.6% in the first half to 4.8%, Segro said in statement. However, in the company´s Central European portfolio they declined by 0.7%, weighed down by lower rents on renewal in Central Europe.

During the reporting period in question, Segro signed five new, unconditional pre-let agreements for 188,639 sq m of warehouse space during the period, including a 154,500 sq m big box warehouse in Rome let to a global online retailer and a 13,100 sq m urban warehouse in Paris let to FedEx/TNT, the company said.

We expect to make further disposals over the coming year which will provide funds for investment. These will primarily be big box warehouses and land in Continental Europe offered to our SELP joint venture, along with other tactical disposals of mature assets.

Segro´s trading update for its third quarter was set to be published on 20 August.

"Investment acquisitions are likely to be modest since, in most markets, we believe the risk-adjusted returns available to us through development are more attractive than from buying existing, built assets. However, we will remain alert and open to acquisitions where returns are attractive and in markets where we are seeking additional scale," the outfit said in a statement.