SEGRO is to pause major redevelopment around Heathrow until there is greater clarity over if and when the airport will be expanded.
In its full-year results for 2017, released this morning, the warehouse specialist said: “There is significant potential for near- and long-term development within the portfolio. In particular, redevelopment of the Heathrow Cargo Centre remains an important source of development-led growth in future but we are unlikely to commence this until there is greater clarity over expansion of the airport.
PODCAST: David Sleath talks to EG about why the company has been unable to proceed with major Heathrow development, how it is still accessing the land market despite the toppy prices being paid and how it has seen Amazon and other e-tailers evolve in the past year.
“In the meantime, cargo volumes passing through the airport have surged by 10% in 2017, demonstrating the strength of demand for cargo space and the urgent need for greater capacity.”
Another public consultation on the long-delayed expansion of Heathrow was launched on 17 January to run for 10 weeks.
Chief executive David Sleath has repeatedly called for the development of a third runway. Writing in EG in November 2016 he said: “There is no argument that Britain needs further airport capacity, and when the global trade benefits are taken into account, a third runway at Heathrow is the clear winner. With uncertainty affecting many property sectors in the wake of the EU referendum, a third runway at Heathrow will also deliver a timely boost to office, retail and industrial markets across the UK.”
The company owns more property around London’s airports than any other with a portfolio of around 6m sq ft. In March last year it bought out the remaining 50% of the Airports Property Partnership from its partner Aviva for £365m.
The announcement came within a strong set of annual results for the company. The value of its portfolio rose by 13.6% over the year to just over £8bn, while EPRA NAV rose 16.3% to 556p.
Sleath said: “SEGRO has delivered another strong set of results in 2017 with some of our best ever operating metrics, underpinned by record levels of development completions (almost all of which is pre-leased) our active investment and asset management, as well as further portfolio valuation growth.
“Occupier demand in early 2018 is strong across all our markets and supply of modern warehouse space remains constrained. The prospects for rental growth, particularly in the UK, remain good, and rental values are improving in our Continental Europe urban warehouse portfolio. Investor appetite for prime warehouses remains unsated, attracted by the occupational market fundamentals.
“The structural drivers of demand in our sector (urbanisation, growth of the digital economy and e-commerce) are likely to underpin occupier demand for some time to come and these, coupled with our modern, well-located assets, our current development pipeline and our land bank all offer significant opportunities for future growth.”
To send feedback, e-mail david.hatcher@egi.co.uk or tweet @hatcherdavid or @estatesgazette
