Segro posts profit surge as firms scramble for space

A lady walks past a click and collect sign in Birmingham during the nationwide lockdown.

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LONDON — The U.K.’s top warehouse leasing firm said Friday that the recent online shopping boom will outlast the pandemic, after the company’s profits soared during 2020.

Segro, a U.K.-listed firm specializing in urban and big box warehouses across Europe, reported Friday a 62% increase in profit before tax between 2019 and 2020.

The coronavirus crisis and its subsequent restrictions have led to increasing consumer demand for online services, resulting in firms needing more industrial spaces to service their customers.

“The pandemic has reinforced the importance of efficient and resilient distribution networks to facilitate the provision of a wide variety of goods and services, leading to increased demand for warehouse space,” David Sleath, chief executive officer at Segro, said in a statement. The firm ranks as the U.K.’s largest industrial real estate owner.

New headline rent (rent without concessions) reached £77.9 million ($109 million) in 2020, of which £41.1 million emerged from new pre-let agreements, it said. In addition, vacancy rates remained low over the same period at 3.9%, versus 4% in 2019.

Future of online shopping

Going forward, Segro expects the trends exacerbated during the pandemic will continue well beyond it.

“We believe there has been a step-change in consumer behaviour. Some of the factors that were considered as barriers to increased levels of online sales penetration, for example concerns about the quality of food bought online and reluctance to share financial information over the internet, have been overcome and habits have potentially changed irrevocably,” the firm said in a statement.

In the U.K. alone, internet sales as a percentage of total retail sales have risen by almost 15 percentage points since December 2019. In the EU, more than 7 out of 10 internet users made online purchases in 2020, according to a report released in January, with younger age groups contributing to the biggest increase in e-commerce.

“Our customers certainly do not expect there to be a significant retreat and are already preparing to adapt their businesses to respond to levels of online sales that are well ahead of previous expectations,” Segro said on Friday.

There is, nonetheless, a regional difference. Whereas in the U.K. online services are well developed, Segro noted that other European markets are “much less advanced.”

“We see this as a significant opportunity going forward and are well-placed to respond to it with our strong operating platform across France, Germany, Italy, Spain, Poland, the Netherlands and the Czech Republic,” they said.

Segro’s shares rose 2% in late morning European trade.

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