Industrial and logistics property specialist SEGRO, has released a first half report showing a pre-tax profit of £330 million, comparing favourably to the same period in 2014 when a sum of £226.5 million was achieved.
A large part of this growth was a 4.3 per cent hike in rental income from its overall portfolio, with 5.8 per cent contributed by UK assets alone. Furthermore, the high demand for space in key areas increased new rent contracts by £15 million, and there is currently an encouraging pipeline of leasing deals under negotiation.
SEGRO is presently continuing to re-shape its portfolio to focus upon industrial space in key commercial areas, particularly in the logistics “golden triangle” between London, the South East and the Midlands. Chief executive David Sleath believes that the effects of this programme are already being felt both in the UK and in Continental Europe, where many of the firm’s assets are located.
He says; “2015 is shaping up to be another good year for SEGRO with strong operating metrics and portfolio performance, as the benefits of the portfolio re-shaping programme continue to be felt.
“We have experienced particularly strong demand from parcel delivery companies, third party logistics operators and retailers as economic conditions in our major markets continue to improve.”
One of the few negative elements contained within the report was the portfolio vacancy rate, which rose from 6.3 per cent on the 31st of December 2014 to 7.4 per cent as of the end of June. However, this was largely due to the acquisition and disposal activity conducted by SEGRO during the first half, which caused a lift of 0.4 per cent in the vacancy rate, and also the completion of several high profile speculative developments, which also caused a rise of 0.4 per cent.
The completion of developments within the portfolio added an annualised rental income of £3.2 million, with the potential to rise to £5.2 million when fully let. Furthermore, this income could be boosted by a further £22.4 million when the current development pipeline is completed and fully leased – as of the 30th June 2015, 50 per cent of this space was already pre-let, guaranteeing an elevation in income of at least £10 million per annum.
Mr Sleath maintains that focusing upon future developments is the best course of action for the firm given current market trends and occupier demand.
He says; “The limited supply of high quality industrial and logistics space in our main markets, together with the impact of powerful structural drivers of demand for our products and sustained investor appetite for high quality assets, should be supportive of property returns for some time to come.
“As it becomes increasingly difficult to secure acquisition opportunities which meet our return targets, we are focusing investment activity on our development programme, approving new construction and adding to our land bank in our core markets. We remain optimistic about our future operating performance as well as portfolio values.”
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