Segro cautious about year ahead

'While we have made good progress with our own letting and development programme, we are cautious about the outlook both for occupier markets and investment markets,’ it said.

'We anticipate some weakening in demand for industrial space in the months ahead and expect property values to show further declines until such time that debt markets stabilise.’

Segro’s property portfolio fell 10.4% fall in value for the six months ended 30 June and as a result said it expects to ‘commence relatively little by way of new developments, particularly those of a speculative nature.’

However it said it would ‘continue to pursue opportunities to generate cash from disposals where acceptable prices can be achieved.’

Its next valuation will not be until 31 December, but SEGRO said this morning that the Investment Property Databank (IPD) indicates that capital values of UK industrial properties have declined by 6.1% over the third quarter of 2008.

‘Due to the relative scarcity of transactions in the market, the IPD index may not be fully reflective of the “true market,” it said.

Its overall vacancy rate was 9.5% at the end of September, a slight increase from the 9.3% seen at the end of June.

While it confirmed that interest for new space has slowed in the UK in the third quarter, although at similar levels seen in the corresponding periods in 2006 and 2005, it said that enquiry levels in Continental Europe have remained good, particularly in Poland.

It is to sell the Vendal Park in Budapest (314,306 sq ft) to German fund SEB Investment for €20m (£16m) and pre-let a116,000 sq ft data centre to operator Equinix at an annual rent of £1.5m.

Segro chief executive Ian Coull said: ‘Our carefully planned development programme which has been concentrated in attractive markets, coupled with our active approach to asset and customer management, has enabled us to continue delivering excellent letting results.

‘Nonetheless we are cautious about the near term outlook for our markets and for property values.

‘Looking further ahead, I believe there will be some very attractive investment opportunities in the coming years.

'We are managing the business in a cautious and disciplined manner to ensure that SEGRO is well placed to take full advantage of such opportunities.'