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SEGRO buys London logistics scheme at a staggeringly low 2.3% yield

SEGRO has acquired Electra Park, a 13-acre urban warehouse estate in Canning Town, London from Schroders for £133m, representing a net initial yield of 2.3%.

The acquisition yield for Electra Park, which provides 21,200 sqm of lettable space across 10 units of which nine are let, is thought to be the lowest ever paid for a logistics property in the UK.

Once the vacant unit is let (it is currently under offer to a tenant) the yield rises to 2.6%. The price paid reflects the strength of the logistics market in the UK, especially in the London market where supply of urban logistics sites, which are highly sought after by e-commerce occupiers, is particularly scarce.

The weighted average unexpired lease term (WAULT) on the let space is 4.3 years to break and 6.4 years to expiry. The estate generates a topped-up passing rent of £3.4m, reflecting a low average rent of £14 per square foot. SEGRO will try to increase the rents in line with the estate’s estimated rental value (ERV) of £21 per square foot. 

The estate is in a prime location, close to Canary Wharf and London City Airport as well as being bordered by the A12 and A13 main roads, connecting it directly to central London. 

SEGRO already has a large footprint in London, in West London, North London and East London, and this acquisition consolidates its position as the leading logistics landlord in the capital.

Trading update

The company also released a trading update today. It said it had collected 85% of rent billed for the fourth quarter of the year, and added 96% and 95% of the rent for the second and third quarter respectively had now been collected.

In the third quarter, the group signed contracts worth £15.8m of new headline rent, while rent roll growth from existing space, net of take-backs was £5.6m. New headline rents on review and renewal were 10.3% higher than previous passing rent in the nine months to 30 September 2020.

On the development front, the company has completed 695,800 sqm of new developments in the first nine months of the year, capable of generating £38.0m of headline rent, 80% of which has been leased. Developments capable of generating £11m of headline rent are expected to complete in the fourth quarter, £8m of which has been secured.

SGRO : SEGRO buys London logistics scheme at a staggeringly low 2.3% yield

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