SEGRO reports strong UK rental growth

SEGRO has reported continued strong rental growth in the UK in a trading update for the third quarter.

In the nine months to the end of September, new rents on review and renewal were 5.5% higher in the UK compared to 4.6% in the first half of the year.

SEGRO said rental growth was especially strong in London and the South East.

By contrast, in continental Europe, new rents dipped 0.4%- although this was marginally better than the 1.7% fall reported at the half-year.

SEGRO contracted £13.5m in new rent during the third quarter, including £3.9m in rent from existing space.

However, the vacancy rate nudged up from 4.8% to 5.7%, largely as a result of the completion of speculative development projects, notably two big box warehouses in Rugby Gateway.

“Our operating business has shown continued strength over the third quarter. We have seen further absorption of existing space and our development pipeline continues apace with £8m of new pre-lets signed, funded by the well-supported equity placing in early September,” said David Sleath, chief executive of SEGRO.

SEGRO raised £325m the placing, most of which will go towards funding the group’s development pipeline.

During the latest quarter, the company completed sales of £131m, in line with June’s book value, and invested £174m, including £84m of development capex.

Sleath noted that the investment market was starting to pick up again after the EU referendum.

“Despite an initial hiatus following the UK’s Referendum on EU membership, liquidity is starting to return to the UK investment market and there remains strong demand for high quality warehouse assets from a broad range of investors,” he said. 

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