SEGRO LON: SGRO reported higher first-half earnings and rental income as improving occupier sentiment supported leasing activity, development pre-lets and rent reviews across its industrial, logistics and data-center operations.
Chief Executive Officer David Sleath said the company had a “strong first half,” with demand continuing to improve following the pickup it had identified late last year. SEGRO signed £53 million of new headline rent during the period, including £27 million from its existing portfolio and £26 million from development lettings.
Pre-let activity rose sharply, with £24 million of pre-lets signed in the first half, compared with £3 million in the same period of 2025. Deals included a powered-shell data center, as well as agreements with postal and parcel operators, third-party logistics providers, a fiber-optic cable manufacturer and food-and-beverage businesses.
Rental Growth and Occupancy
Like-for-like net rental income increased 5.3% in the first half, driven by asset-management activity, rent indexation and renewals. SEGRO secured £11 million of additional rent from indexation reviews and renewals, with the U.K. portfolio producing an average uplift of 44%. Sleath said rent review dates are weighted toward the second half and that the figure should “materially increase” for the full year.
Occupancy edged lower but remained within the company’s target range. Continental European occupancy stood at 96%, while U.K. vacancy remained elevated in certain London submarkets. However, Sleath said more than one-third of U.K. vacant space was either under offer or in advanced negotiations, and SEGRO expects occupancy to improve in the second half.
Customer retention was 77%, below the levels typically seen by the group, reflecting expected take-backs in markets including Poland and the Netherlands. Sleath said the returned space could allow the company to reset rents and capture rental reversion more quickly. He added that much of the returned space was already leased or under advanced discussion.
The company identified £157 million of embedded opportunity in its standing portfolio, comprising £101 million of marked-to-market rental potential and £56 million of estimated rental value associated with vacant space.
Development Activity and Capital Allocation
SEGRO completed or exchanged on £308 million of disposals during the year to date, including a portfolio of Amazon delivery stations in Italy, an older Paris warehouse and several London-area properties sold to special purchasers. It acquired £37 million of land, including a 45-acre site near Heathrow Airport obtained in an off-market transaction.
The company invested £176 million in development during the first half and narrowed its full-year development capital expenditure guidance to between £500 million and £550 million. More than 750,000 square meters of space is under construction.
First-half development completions totaled 116,000 square meters, representing £12 million of headline rent when fully let. The projects were primarily speculative urban schemes in Germany, Barcelona and Warsaw, along with a smaller West London project. SEGRO had secured 58% of the rent from these completions by the end of the period, while the average expected development yield was 6.5%.
SEGRO’s current and near-term industrial and logistics development pipeline totaled £90 million of potential new rent, 75% of which was linked to pre-lets. The pipeline is expected to generate an average 7.4% development yield. Including land already owned and land options, the company cited £441 million of potential industrial and logistics development rent.
The group also agreed heads of terms for a U.K. big-box joint venture involving completed assets and land in Coventry, Northampton and Radlett. If completed in the second half, SEGRO would contribute a £1 billion seed portfolio, while future equity commitments would be funded equally with its partner.
Data-Center Expansion
SEGRO continued to build its data-center strategy, reporting a power bank of 3 gigavolt-amperes, including 0.5 GVA of operational capacity. It identified 1.4 GVA of near- to medium-term development opportunities, associated with approximately £460 million to £464 million of potential rent.
During the first half, the company signed a powered-shell data-center pre-let with existing customer VIRTUS at the Slough Trading Estate. It also received planning approval for its first fully fitted data-center project in West London and said it was in discussions with hyperscale customers for the capacity. SEGRO remains on track to sign a pre-let there by the end of 2026 or in early 2027.
The company added 0.5 GVA of further power reservations and continued infrastructure work in Slough ahead of power allocations expected from the Uxbridge Moor substation upgrade in 2029 and 2030.
Sleath said Ofgem’s consultation on potential upfront grid-connection payments could be beneficial for established operators if it removes speculative power applications. He said SEGRO understood the proposal would apply to new applications rather than its existing secured capacity.
Financial Position
Chief Financial Officer Susanne Schroeter said adjusted profit before tax rose 6.3% to £268 million, while adjusted earnings per share increased 6.6% to £0.193. The interim dividend increased 4.5% to £0.1014 per share. Schroeter said the dividend increase reflected a limit related to Prologis’ best and final offer and was not indicative of SEGRO’s full-year expectations.
EPRA net tangible assets per share fell 2.5% to £9.02, reflecting a modest valuation decline associated with yield expansion. The portfolio was valued at £19 billion at June 30, down 1.2%, largely because of higher yields applied by the group’s incoming U.K. valuer. U.K. values declined about 2%, while continental European values increased 0.1%.
ERV growth accelerated to 1.8% across the group, including 2.3% in the U.K. and 1.1% in continental Europe. SEGRO ended the period with a 31% loan-to-value ratio, £1.5 billion of cash and undrawn committed facilities, an average debt maturity of 6.5 years and an average cost of debt of 2.8%.
Looking ahead, Schroeter said SEGRO sees more than £1 billion of additional income opportunity across its standing portfolio and industrial, logistics and data-center development pipelines, excluding future acquisitions, disposals, rental growth, indexation and an additional 1.1 GVA of longer-dated data-center power capacity.
About SEGRO (LON:SGRO)
SEGRO is a UK Real Estate Investment Trust (REIT), and a leading owner, asset manager and developer of modern warehousing, industrial property and data centres across the UK and seven other European countries.
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