Commercial property has been hard hit by the coronavirus crisis and the measures taken to contain it but updates from Segro (SGRO) and LondonMetric Property (LMP) suggest the logistics space is in a good place.

Demand for logistics or, essentially, warehousing assets is being driven by a shift towards online retail and Segro announced this morning that a planned £650m placing had been upsized to £680m amid strong demand, as it looks to put money to work in this part of the market.

The funds were raised at 820p, a modest discount to the prevailing share price and will be used to buy land for developments, existing assets and expand capacity at sites it already owns.

LondonMetric, which recently raised £120m in its own oversubscribed placing to fund its own acquisition drive, hiked its full year dividend this morning after a rise in rental income helped boost its underlying earnings.

Segro dips 1.2% to 848.2p on news of the placing while LondonMetric is broadly unchanged at 213p. But both share prices have recovered much more strongly from the market correction in March than other property stocks.

DIVIDEND HIKED

The company declared a full-year dividend of 8.3p per share, up 1% on-year.

In a separate statement, the company said it had recently exchanged contracts on 213,000 square foot of distribution lettings.

At its Stoke development, Pets at Home had taken a new lease on a 141,000 square foot distribution unit.

At a site in Birmingham, Network Rail had taken a new lease on 38,000 square foot of distribution warehousing at a rent of £7.50 per square foot, up 8% on previous passing rent and generated additional income of £0.1m a year.

In Greenford, West London, Metabolic Healthcare had taken a new lease on a 34,000 square foot warehouse at £12.80 per square foot and the new rent was 82% above the rent paid on acquisition in 2018.

AJ Bell investment director Russ Mould says: ‘The pandemic is accelerating existing trends which were driving demand for so-called logistics assets, essentially warehouses.

‘As more shopping for food and other items is done online, companies need big out-of-town facilities from which to sort and distribute products as well as hubs closer to urban centres to support deliveries to customers.

‘The empty supermarket shelves seen at the start of the crisis and the difficulties in transporting medical supplies around the country reflect the importance of robust supply chains of which warehouses are a key part.

‘It’s little wonder that big property companies want to go on a spending spree and Segro’s oversubscribed £680 million placing will put it in a strong position to expand its estate.’

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Issue Date: 10 Jun 2020