Shares in warehouse landlord Segro (SGRO) climb 2.5% to 428.7p as the strategy to modernise the company's portfolio gathers pace. The £3.2 billion cap has struck a deal with Hermes Property Unit Trust to add a 9,800 square foot distribution warehouse in Hayes, West London to its portfolio.
Segro is paying a headline £21.9 million for the warehouse, although the company will actually bank £25.1 million payment itself from Hermes, which is taking a pair of industrial estates of egro's hands in a separate £47 million deal.
Segro’s new asset is let to Allport Cargo Services until 2026, generating 4.9% of the acquisition price in rent each year.
A rent review in March 2016 is unlikely to be an issue due to a lack of industrial space in Southern England.
This is one of the reasons why industrial property is predicted to generate attractive total returns of 9.5% on average in each of the next five years, despite growth for commercial real estate overall slowing.
An improving economy and the growth in online shopping are also factors in the sub-sector’s growth, according to real estate adviser CBRE.
The firm forecasts that a record £70 billion will be invested in UK commercial property in 2016. It appears that industrial property is set to be one of the winners.