SEGRO, which runs the Slough Trading Estate and has other interests in the Thames Valley area, has announced that despite a fall-off in transactions in the year so far in the wider UK property markets, both investor and occupier demand for its brand of well-positioned warehousing remained resilient in an inline trading update for the first quarter of this year. It expects to spend approximately £300 million on development during 2016 as a whole.
David Sleath, chief executive, said: "2016 is progressing well and in line with our expectations. Occupier demand for good quality, modern warehouse space in key locations remains encouraging and we have had another strong quarter of signing up new rental commitments, showing a healthy improvement compared to the equivalent period last year, driven by pre-let agreements and letting up space developed speculatively.
"While real-estate investment volumes generally in the first half of 2016 are expected to be much reduced on 2015, recent transactions suggest that investor demand for high-quality, well-located warehouses remains strong.”
In the first quarter SEGRO secured £8.6m of new rent (Q1 2015: £6m), including £3.6m of prelets (Q1 2015: £1.8m). The vacancy rate has remained at near historic lows, increasing slightly to 5.1% (31 December 2015: 4.8%), mainly reflecting the return of short-term space taken over the Christmas period (+0.5%) and lease expiries (+0.1%), offset by development lettings (-0.3%).
SEGRO said that the level of asset pricing in the investment market means that the focus of its investment activity has been on development rather than acquisitions. 53,100 sq m of developments were completed in the first quarter, capable of generating annualised rent of £3m (SEGRO share) when fully let, of which £2.8m has already been leased.
SEGRO also approved or commenced the development of 164,300 sq m of space during the first quarter, of which 98,500 sq m is pre-let. Within the 65,800 sq m of new speculative urban warehousing development approved, 20,400 sq m is in the Heathrow and Thames Valley markets. Much of this development is on land purchased within the last 18 months.
Credit: CoStar
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