Segro, one of the UK’s biggest commercial landlords, today predicted a 50% rise in rental incomes in the next three years amid a rebound in demand for space with London in the lead.
The FTSE 100 company has £6 billion’s worth of property sets in the capital alone, making up over a third of its total asset base. It said there was “significant uplift” in rents and predicted that income from them would rise further toward 2027 as it let more vacant space.
A wave of dealmaking activity has swept through real estate investment trusts this year, helped by hopes that investors returning to the sector would bring an end to a drop in its net asset values.
Segro’s chief financial officer, Soumen Das, told the Standard that “for the right company, we will absolutely be there, but it’s going to be a top quality threshold” for any bid.
“We are very focused on keeping the quality very high and not diluting our location strategy … they’re aren’t that many pure plays that hit our quality threshold.”
Rising interest rates have boosted the yields on offer from other sectors, drawing investors away from real estate and pushing net asset values down. Segro said today it expected that to “bottom out” and as “rents continue to grow” it expects “improved profitability.”
Das explained that demand from “a really wide variety of customers” was driving the rise in rates, which was also a longer-term trend, singling out Segro’s biggest warehouse estate in West London, where Royal Mail, DHL and Sofology have let space.
“Park Royal rents have grown from in the area of £10 to £15 per square foot to the £25 to £30 per square foot area. London has performed terrifically over the last dozen or so years.”
Overall, the company expects £50 million in new headline rent from 625,700 square metres of development completions.
For 2023, pre-tax profit for 2023 rose 6% to £409 million, with net asset value per share was down by over 6% to 987p. Segro upped its dividend by 5.7% to 27.8p per share
Its stock topped the FTSE 100, up by over 19p to 852p.
