Demand for data centres helps lift Segro rental income to new high

The firm said it had signed a string of new leases with data centres, including at a new multi-storey data centre development in Slough, amid growth in the use of cloud computing.

Segro boss David Sleath said “About 7% of our portfolio is now providing space for data centres, much of which is in Slough which is the biggest datacentre hub in Europe.

“[But] we’ve seen a very steady and growing demand for data centre space across Europe including in Frankfurt, Paris, Milan and Madrid.”

Rental income climbed 18.9% to £522 million in 2022, helped on by a 10% rise in rents in the London area, while pre-tax profits grew 8.4% to £386 million. Vacancy levels were at historic lows, Segro said, while increasing urbanisation was likely to lead to further demand for space closer to end-customers in city locations.

However, the value of Segro’s portfolio shrunk almost £500 million, or 11%, to £17.9 billion as soaring interest rates cooled real estate transactions.

“We saw a 29% growth in value in 2021 so it’s partly giving back some of that Covid gain in asset values,” Sleath said.

“[But] when interest rates and bond yields jump, it’s bound to mean that investors demand a higher yield and want to put their money to work.

“There was effectively a buyer’s and seller’s strike on transactions so the volume of transactions fell.”

Segro shares climbed 3.7% to 867p.