SEGRO’s rental income leapt during the third quarter of its financial year, on the back of strong demand from e-commerce occupiers.
Total headline rent – the annualised gross passing rent receivable once rent incentives have expired – grew by 43% to £52m during the nine months to 30 September compared with the same period last year, including £4.2m in rent from existing space.
In Q3 the industrial specialist contracted £12.6m of new headline rent, compared with £8.8m in the same three months in the previous year.
SEGRO completed 2.4m sq ft (219,800 sq m) of new developments in the quarter, compared with 3.4m sq ft (313,000 sq m) in Q3 2017. It said this is capable of generating £10.6m of headline rent, of which £8.5m has been leased.
The vacancy rate grew slightly to 5.2%, compared with 4.8% at 30 June 2018, owing to completion of speculative developments during the quarter.
It disposed of £106m of land and assets during the third quarter, including a portion of the site of the former Nestlé factory in Hayes, Middlesex, approved for residential development.
At 30 September 2018, it had a development pipeline of 9.6m sq ft (891,000 sq m), equating to potential future headline rent of £46m, of which 71% has been prelet. Once complete and fully let, it is expected to generate a yield on total development cost of around 7%.
Chief executive David Sleath said: “SEGRO’s business has continued to perform well in the third quarter of 2018. Ongoing favourable occupier market conditions have enabled us to achieve another strong leasing performance for both new and existing space.
“In line with our disciplined approach to capital allocation, we have exchanged or completed disposals totalling over £200m during the period at a significant premium to book value, taking advantage of strong investor demand and a limited supply of prime, well-located assets.
“The structural trends of e-commerce and urbanisation continue to underpin occupier and investor demand for prime warehouse space, notwithstanding near-term economic and political uncertainty in the UK. We remain optimistic about our prospects for the remainder of the year and into 2019.”
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