Mixed bag for SEGRO

28th Apr 2011 17:18

Property group SEGRO saw an encouraging revival in its retention rate in the first quarter, despite continuing tough market conditions, though the number of customers giving up their leases remains a concern.In the UK, the vacancy rate (expressed as a percentage of rental value) dipped to 13.2% at the end of the first quarter from 13.3% at the end of 2010, with the vacancy rate for the former Brixton Estates portfolio improving to 17.0% from 18.6%.In total, 39 new leases were signed across the UK portfolio generating £3.2m of annualised rental income, down from £7.6m in the first quarter of last year, when the figure was inflated by the £2.8m of annualised rental income from the take up of pre-let developments which completed in the first quarter of 2010. Furthermore, there was less space available to let at the start of 2011 compared to the beginning of 2010.Occupier demand continues to be strongest in London and the South East.The company lost £5.1m of annualised rental income in the first quarter of 2011 (Q1 2010: £3.0m) as a result of space returned in the quarter. This includes £2.5m of annualised rental income which was lost as a result of early surrenders, in part to facilitate future developments.In continental Europe, the vacancy rate rose to 9.6% from 8.9% at the end of 2010, while rent per annum from new leases was £3.1m, versus £4.0m in the first quarter of last year.Space returned in the quarter amounted to £3.0m per annum, and was lower than the £5.7m figure a year earlier."Occupier market conditions continue to be challenging as issues such as sovereign debt worries, the austerity measures in the UK and rising energy prices impact sentiment with many customers remaining focused on cost control and the consolidation of their space requirements. Against this backdrop we are pleased to have seen good levels of enquiries, healthy demand for existing and new space and an encouraging pick up in our retention rate in the first quarter," said SEGRO's new chief executive, David Sleath. In a separate announcement, SEGRO said it has agreed to develop a new 32,300 square metre campus facility for Alcatel Lucent at its Energy Park, Vimercate, Italy. Alcatel Lucent has entered into a 10 year lease with SEGRO, generating annual rental income of £4.2m.---jh