London-listed property company SEGRO last month reported a 10.6% rise in its half-year EPRA profit, boosted by a fall in vacancy rates and a rise in the value of its assets.
The industrial and logistics space REIT’s pretax profit for the six months to 30 June totalled £71.1m, up from £64.3m (€72.5m) for the same period the previous year.
The company’s vacancy rate fell to 11.4% from 14% last year, and its gross assets increased in value by 1.3% to £5.4bn.
The group secured £20.2m of new annualised rental income secured from lettings of existing space and prelet developments. Like-for-like net rental income increased by 5.1%. Net asset value per share increased marginally to 377p from 376p, while the group’s customer retention rate improved from 58% to 74%.
New completions
During the six months, 29 new schemes completed, were under construction or contracted, representing capital expenditure of £205m and annual rental income of £24m, of which 75% is let or prelet.
SEGRO is active in seven countries, has a €2bn portfolio comprising 2.6m m2 of existing space and 450 ha of land.
Andy Gulliford was named managing director, continental Europe, in April last year. Gulliford has been at SEGRO for seven years. He joined after 19 years at property consultancy Jones Lang LaSalle, where he was European director for its industrial and logistics business.
Gulliford says: “The real estate we are most interested in is multilet industrial property – what we term urban logistics. These are smaller warehouses associated with the more commercial conurbations typically serving a retail centre or maybe an internet retailer. We also invest in regional, national and international logistics centres of 10,000 m2 and larger, the classic big-box sheds,” he says.
The company also has some offices, including some large parks outside Brussels and Milan, but this is a minor focus.
“I’m particularly keen on Paris, and 80% of our French portfolio is in Ile de France. The region meets our needs for smaller urban logistics and also our larger logistics too. We’re involved in the second city, Lyon, but on a smaller scale, and looking to build on our position in Paris,” says Gulliford.
A recent prelet at Gonesse, north of Paris of a new 28,000 m2 distribution facility to French retailer Casino has given it an appetite for more of these types of deals.
Light industrial in Parisian suburbs
In the northern suburbs of Paris at Courneuve, SEGRO is building speculatively an 8,000 m2 light industrial unit. “We have a little bit of speculative development in our portfolio. More than 75% of our development is prelet but where we see a good supply and demand equation, we will do speculative development creatively and cautiously.”
He turns to Germany’s Rhine-Ruhr area, where Cologne, Dortmund and Essen have “very much been our heritage cities in the country”. SEGRO is also involved in the country’s big five cities.
“I am keen on Frankfurt especially as it is a big a financial centre and there could be an opportunity for data centres in the future. It is a major airport hub and we like being involved in air-related property. Our biggest UK holdings are around Heathrow and also Charles de Gaulle airport in Paris.”
The company has a small presence in Hamburg and wants to improve its position there, considering both investment stock and development. In June, SEGRO completed and let a 20,700 m2 logistics facility for Takko, the German retailer.
Berlin is favoured too. “We have now received planning permission for the construction of a business park on our development site in Berlin adjacent to the site of the new Berlin Brandenburg Airport, which will open next June.
“This could eventually encompass 84,000 m2 of logistics space, 87,000 m2 of light industrial space and 62,000 m2 of suburban offices. We have started marketing the SEGRO Business Park Berlin Airport and are beginning it by building an initial 12,200 m2 of light industrial space on a speculative basis,” says Gulliford.
The company has also started work on the first phase of 12,200 m2 of speculative light industrial space as part of its Rheinpark project in Düsseldorf.
SEGRO is active in five cities in Poland, favouring the Silesia corridor in the south. It is planning a two-building project at Tychy; the first, totalling 17,000 m2, is under construction and 68% prelet, while the second of 18,900 m2 is fully let.
The company’s vacancy rate in Poland is 3.4% and compares favourably with the market vacancy, which is around 14%. Gulliford says the company is less active in Warsaw but sees an opportunity for expansion there. SEGRO has a 40 ha site in Gdansk and is presently obtaining development permits for it.
“In Belgium we have done very well in the logistics triangle between Brussels, Ghent and Antwerp and we want to expand this business,” says Gulliford.
SEGRO has Energy Park at Vimercate in Milan, where it has had recent success in prelets, but, as with the Czech Republic, there are no immediate plans for large-scale expansion in Italy.
For the future, the company says its development platform is strong, supported by a £395m land bank with the potential to generate annual rental income of £110m on capital expenditure of £900m.
