UK REIT Segro contracted £8.6 mln (€10.9 mln) of new rent in the first quarter of 2016, an increase of £2.6 mln on the previous year, the company said the publication of its quarterly trading figures.
The increase was largely accounted for by pre-lets, which doubled in volume from €1.8 mln in Q1 2015 to €3.6 mln.
Chief executive David Sleath said: ‘2016 is progressing well and in line with our expectations. Occupier demand for good quality, modern warehouse space in key locations remains encouraging and we have had another strong quarter of signing up new rental commitments, showing a healthy improvement compared to the equivalent period last year driven by pre-let agreements and letting up space developed speculatively.
‘Whilst real estate investment volumes generally in the first half of 2016 are expected to be much reduced on 2015, recent transactions suggest that investor demand for high quality, well located warehouses remains strong.’
Segro saw its vacancy rate increase slightly over the quarter to 5.1%, with £4.1 mln of space being returned during the quarter. This was mainly due to the expiry of a lease in Park Royal worth £1.2 mln. The company is in negotiations with potential occupiers for the 9,300 m2 unit.
In the first quarter Segro completed 53,100 m2 of developments with a potential annualized rent of £3 mln when fully let, £2.8 mln of which has already been leased.
Segro approved or commenced development of 164,300 m2 of space in the quarter, of which 98,500 m2 has been pre-let. This includes a 36,600 m2 distribution warehouse in Italy for luxury fashion retailer Yoox and a 14,800 m2 warehouse, also in Italy, for international freight distributor One Express.
Overall 518,800 m2 of space was approved or under development at end-March 2016, equating to a potential future annualized rent of £30.3 mln and reflecting a yield on total development cost of 7.8%.
The proportion of development space which was pre-let is 56%, down from 61% at the end of the previous quarter.
