SEGRO has issued an upbeat third quarter trading statement, reporting good occupational demand, increased rental income and strong investor appetite for prime warehouse assets.
Its Q3 vacancy rate dropped to 4.1%, down from 5.5% at the end of June, it contracted £8.8m of new headline rent and completed 313,000 sq m (3.4m sq ft) of fully let developments.
The largest of these was a 156,000 sq m fulfilment centre for Amazon in Rome.
Lettings of existing space and development completions in the third quarter also contributed to an improvement in the vacancy rate to 4.1%, compared to 5.5% in the previous quarter.
The speculatively developed warehouses at Rugby Gateway in the Midlands and Navigation Park in Enfield have been let to DHL and one of the two remaining warehouses at Origin in west London to Amazon. These transactions added £2.4m to the headline rent.
As at 30 September, 725,000 sq m of space was in the current development pipeline, which equates to a potential future headline rent of £41m.
These projects are 54% let or prelet by rent. SEGRO added that it is on course to invest in excess of £350m into its development pipeline in 2017.
Chief executive David Sleath said: “The positive momentum in SEGRO’s business has continued, driving increased rental income across both existing and new space. During the third quarter, we have completed new big box distribution warehouses for Yoox Net-a-Porter and Amazon in Italy, and a new urban parcel distribution warehouse for Fedex/TNT in Paris, reflecting demand related to e-commerce, which continues to be an important component of our business.
“Investor appetite for prime warehouse assets remains strong, attracted by the structural drivers of occupier demand, limited supply and the prospect of rental growth particularly in the UK and in urban warehousing in continental Europe.
“These trends in occupier and investor demand provide a supportive backdrop for SEGRO’s performance for the remainder of 2017 and into 2018.”
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