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23 February 2021

Segro Shifts to Online

Real Estate Investment Trust (REIT) Segro has continued to buck the trend of the ailing commercial property sector, playing on the ever-increasing shift to e-commerce.

A surge in demand for its warehouses as companies look to switch online in order to survive the pandemic, helped increase the value of its assets in 2020 by 10%, with net rental income up by 2.1% also. Rent collection rates remained strong at 98% as the firm’s focus on a growing area of the commercial property market meant that very few of its customers had problems paying. We would likely expect this high level of collection rates to continue as Segro targets high-quality tenants, benefitting from the now accelerated shift to online ordering.

The firm also continued its expansion plans during 2020, purchasing two new warehouse parks in London and perhaps more importantly, announcing a 75% stake in a French warehouse owner. This should help to expand its already diverse portfolio of assets, adding to the 12 properties it already owns in France.

It should be noted, however, that while the accelerated shift to online orders has greatly helped the company, the long-term growth profile may be slightly less prolific than during 2020 as countries start to reopen and the increased penetration of online orders starts to slow. We would expect consumer confidence in high-street stores to slowly start to increase as the number of vaccinated adults in the UK and internationally starts to rapidly increase and consumer agitation on the duration of lockdown also ramps up.

Please note that investments and income arising from them can fall as well as rise in value. This communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.
 
Segro Shifts to Online

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