Andy Gulliford, chief operating officer, SEGRO
Market conditions remain challenging. We are finding occupiers taking longer to make decisions about moves to new premises or expanding from their existing base. On the supply side, developers are cautious about the strength of demand for their product.
At SEGRO, we are seeing positive emerging trends that offer opportunities for growth. At the same time, a shortage of high-quality buildings, because of the lack of development over the past few years, reduces choice.
One of these trends is the growing popularity of the urban logistics market. At our West London estates such as Park Royal and Greenford Park we already have established customers such as H&M serving their London store network. To this we can now add the growth of e-commerce, and an increasing demand from e-retailers for units located in and around major population centres with good road access. The “last mile solution” can be critical to an e-retailer – delivering direct to customers at a promised time. Whether this demand manifests itself through postal groups such as Geopost, for which we have developed a facility in Enfield, or the emerging “dark store” requirements from grocery chains such as Tesco and Waitrose, SEGRO’s multi-occupier estates, positioned on the edge of large conurbations, are ideally placed to take advantage of this opportunity.
Of course, there is still a vital market for traditional “big box” logistics – typically 107,000 sq ft and above, favoured by food retailers and third-party logistics operators. SEGRO’s two recent portfolio acquisitions – the UK Logistics Fund and Foncière Europe Logistique in France – demonstrate the importance we attach to this market as we build links across Europe’s transportation corridors.
The growth of the internet brings demand for data centres. This can be in the form of hosting and co-location operators or corporates, particularly the banking sector. For mission-critical facilities and their need for real-time data back up, a “cocktail” of latency, regulatory, connectivity and particularly power requirements dictate location.
It is no coincidence that the vast majority of all data centre transactions in the UK are within 40 miles of London.
We are proud that the Slough Trading Estate has become home to 17 data centres including Savvis and Infinity, thanks to its proximity to the capital, available networks, dual power supply and high levels of security. We are looking to expand our activities in Paris, Amsterdam and Frankfurt.
The shortage of available grade-A existing space has brought a strong demand for prelets, often to match specific customer requirements. SEGRO has completed 11 prelets so far this year for customers such as Schenker in the UK and Decathlon in Europe, with a number of further developments either contracted or under construction. We are also committing to some speculative development, but only where we know there is limited supply and clear demand. On the Slough Trading Estate we are developing 167,000 sq ft of spec build, of which nearly 70% is now already leased. And in Park Royal, in London, we will also be looking to develop on a speculative basis. Paris and Berlin have seen speculative starts too with over 50% let prior to practical completion.
