SEGRO strength continues in third quarter

The FTSE 250 firm said it saw continued momentum on leasing and pre-leasing of warehouse space, contracting £13.5m of new rent during the third quarter, including £3.9m in rent from existing space.

It completed 169,500 sq m of new developments, capable of generating £11m of gross passing rent once fully let, of which £6.1m has been leased.

As SEGRO anticipated, the vacancy rate increased to 5.7%, from 4.8% at the start of the period, reflecting the completion of speculatively developed space during the period which has not yet let.

Rents were continuing to improve in the company’s UK markets, especially in London and South East England.

In the nine months to 30 September, new rents on review and renewal were 5.5% higher in the UK and 0.4% lower in its Continental European portfolio, due mainly to slightly lower rents on renewal in Central Europe, stable rents in Germany and modest increases in France.

Net debt - including SEGRO’s share of debt in joint ventures - was £1.9bn at period end, from £2.1bn at the beginning of the quarter.

The board said that principally reflected the receipt of proceeds from the equity placing and net investment during the period.

It continued to expect to deploy the funds raised in the equity placing into its development pipeline over the next 12 to 18 months.

The look-through loan to value ratio at 30 September - based on asset values at 30 June, adjusted for development expenditure, acquisitions and disposals - was 32%.

“Our operating business has shown continued strength over the third quarter,” said chief executive David Sleath.

“We have seen further absorption of existing space and our development pipeline continues apace with £8m of new pre-lets signed, funded by the well-supported equity placing in early September.”

Sleath said despite an initial hiatus following the UK's referendum on EU membership, liquidity was starting to return to the UK investment market and there remained strong demand for high quality warehouse assets from a broad range of investors.

“During the third quarter, we have completed sales of £131m of assets and land, all in line with or above book value at 30 June, and invested £174m in improving and growing our portfolio, including the acquisition of big box warehouses near Barcelona and Turin and £84m of development capex.”