The industrial property boom in the UK, driven by the rapid growth of e-commerce, looks still to be in full swing judging by results from warehouse landlord Segro (SGRO).

The company reports 2018 results ahead of expectations with net asset value up 17%, earnings up 18% and the dividend up 16% to 18.8p. This was underpinned by robust rental growth and low vacancy rates.

Management’s confidence in the ongoing opportunity in this space is reflected in a proposed £450m placing to invest in new assets.

The company already has £600m worth of developments due to complete in 2019 and a future pipeline worth £430m to be funded through the proceeds of the placing. Many of these developments have already been pre-let showing the strength of demand from online retail alongside food delivery operators and data centres.

We recently reported on a shift in strategy from fellow industrial property play Tritax Big Box REIT (BBOX) which announced a joint venture to develop its own assets rather than investing purely in already built units – where competition had driven down yields.

Observers noted this might help sustain returns but at the cost of taking on the risks associated with development.


Segro has been active on the development side for some time and particularly in recent years with the result that, as chief executive David Sleath notes, it now has a 'portfolio of very high quality and well located warehouses'.

Liberum analyst David Brockton says: 'Our confidence in Segro's prospects resides in the continued strength of occupational and investment demand for industrial real estate as well as its position serving that market; weighted to major conurbations and spread across varying asset sizes (from big box to light industrial/last mile delivery).

'Industrial remains one of the strongest performing sectors within UK real estate, benefiting from cyclical recovery in occupier demand as well as growth in online logistics. While this has already driven a significant re-rating in valuations, we believe a continued lag in the supply response relative to strong demand should support further growth.'

Issue Date: 15 Feb 2019