Occupier demand still rising - Segro

Occupier demand is rising in spite of continued weakness in the UK's real estate investment market, according to Segro, the London-listed flexible business space REIT.

The group let a total of 167,000 m² to the end of April compared to just over 110,000 m² of space returned. While not as high as the same period the previous year, leasings have shown strong growth, particularly in Continental Europe. The Polish market has played a substantial role by accounting for over 80% of the company's pre-leasings of 63,000 m² this year. The pre-leasing figure will rise by a further 100,000 m² from 2007 upon completion of the developments involved.

Segro has released an interim management statement ahead of its annual general meeting further showing considerable development activity. So far in 2008 over 115,000 m² has been completed, with 70% of the space pre-let. An additional 340,000 m² is currently under construction, with the amount of space pre-let or sold approaching 50%. The majority of recently completed and ongoing development is located in Continental Europe. Headline vacancy rates remain at 9%, with a slight rise in UK vacancy from 10.8 to 11.8% and the Continental European rate unchanged at 5.9%. In the first quarter Segro has invested £ 200 mln (EUR 128 mln) in previously announced acquisitions and its development pipeline.

'Since early March, the downward pressure on UK commercial property values has persisted as expected,' said Segro CEO Ian Coull. 'Despite the continuing negativity of sentiment in investment markets, occupier demand has held up well across all our key markets, with further healthy letting volumes achieved and our overall occupancy level sustained at over 90%. 'Nonetheless, we remain vigilant in managing our risk exposure and have adopted a more cautious approach to speculative developments, particularly in the UK and in Western Europe. In practice, however, this may not have a major effect on the level of our development activity in 2008, given the amount of pre-lettings we have in the UK and the strong demand we are continuing to experience in Central Europe.'