SEGRO posts 5.5% earnings increase, driven by rental income growth

SEGRO has delivered a robust financial performance in 2024, demonstrating strong rental income growth, earnings expansion, and strategic asset management. The real estate investment trust (REIT) capitalised on rising demand for logistics space and data centre infrastructure, reinforcing its position as a leader in the industrial real estate market. With a well-positioned portfolio, the company is poised for sustained growth in 2025 and beyond.

How Did SEGRO Achieve Strong Rental Income Growth in 2024?

SEGRO’s financial results for the year ending 31 December 2024 highlight its ability to drive consistent rental income growth, underpinned by proactive leasing strategies and a disciplined capital allocation approach. The company recorded a 7.0% increase in net rental income, reaching £628 million, up from £587 million in 2023. This performance was bolstered by a record 43% rental uplift on UK rent reviews and renewals, reflecting exceptional occupier demand.

New headline rent commitments totalled £91 million, marking the third-best year on record for SEGRO. Of this, £26 million came from rent reversion in the UK portfolio, where the company successfully capitalised on rising market rents and lease renegotiations. These figures underscore SEGRO’s expertise in maximising rental income growth while maintaining a high-quality tenant base.

The company’s adjusted earnings per share (EPS) rose by 5.5% to 34.5 pence, compared to 32.7 pence in 2023. This growth in earnings per share was driven by increased net rental income, lower interest costs, and strategic asset management initiatives.

What Role Does Data Centre Expansion Play in SEGRO’s Growth Strategy?

A major component of SEGRO’s long-term strategy is its data centre expansion, which has positioned the company as a key player in Europe’s digital infrastructure market. The company has successfully established Europe’s largest data centre hub in Slough, with over 0.5GW of operational and under-construction capacity.

Looking ahead, SEGRO has identified 2.3GW of potential power availability across key Availability Zones in Europe, enabling it to capitalise on surging demand for cloud computing and artificial intelligence-driven infrastructure. The company plans to expand beyond its traditional powered shell model, actively exploring opportunities to develop fully-fitted data centres with strategic partners.

This shift in strategy reflects changing industry dynamics, where hyperscalers and technology firms are increasingly seeking turnkey data centre solutions. By leveraging its land bank and expertise in industrial development, SEGRO is well-positioned to capture additional value from this high-growth sector.

How Is SEGRO Managing Its Portfolio for Sustainable Growth?

SEGRO continued its active portfolio recycling strategy in 2024, focusing on acquiring prime assets with strong rental upside while disposing of lower-yield properties. The company completed £431 million in acquisitions, targeting high-growth logistics hubs in the UK and continental Europe.

At the same time, SEGRO executed £896 million in asset disposals, capitalising on favourable market conditions to offload properties with lower long-term return potential. These transactions included £110 million in land sales, with some plots commanding significant premiums due to strong data centre demand.

The company’s balance sheet remains well-positioned for further expansion, with a loan-to-value (LTV) ratio improving to 28% from 34% in 2023. Meanwhile, SEGRO lowered its average cost of debt to 2.5%, providing financial flexibility for future growth initiatives.

What Does SEGRO’s Development Pipeline Look Like for 2025?

SEGRO remains committed to development-led growth, with a pipeline of high-yield projects aimed at capturing future rental income growth. The company completed £37 million in potential headline rent from newly delivered developments, achieving a yield on cost of 6.9%. 84% of the newly developed space has already been leased, reflecting strong occupier demand for modern, sustainable logistics facilities.

Looking forward, SEGRO has £51 million in potential rent from projects under construction, with 53% of these developments already pre-let. The company has secured planning approvals and infrastructure investment for its Northampton and Radlett big box logistics developments, further reinforcing its long-term earnings potential.

With an exceptional land bank spanning over 1,000 hectares, SEGRO anticipates delivering £422 million in new rental income from future developments, generating a yield on cost between 7% and 8%. This long-term development strategy will be instrumental in sustaining rental income growth and earnings per share expansion.

Why Is SEGRO Confident About Future Growth?

SEGRO enters 2025 with strong momentum, supported by favourable supply-demand dynamics in the logistics and data centre markets. The company’s urban-weighted portfolio, strategic land bank, and disciplined capital management position it for sustained earnings growth.

Occupier activity saw a notable uptick in the final months of 2024, with increased leasing enquiries and pre-letting negotiations. SEGRO expects this momentum to continue, driving further rental income growth and enhancing shareholder value.

In addition, the company’s commitment to sustainability and low-carbon growth continues to resonate with occupiers seeking environmentally efficient logistics solutions. The company has more than doubled its installed solar capacity to 123MW, aligning with long-term energy transition goals.

What Does SEGRO’s 2024 Performance Signal for Investors?

SEGRO’s 2024 financial results reflect a resilient business model, underpinned by high-quality assets, strong rental income growth, and strategic expansion into digital infrastructure. The company’s focus on development-led growth, disciplined asset recycling, and robust balance sheet management positions it well for sustained outperformance in the years ahead.

With rental income growth accelerating, data centre expansion gaining traction, and earnings per share continuing to rise, SEGRO remains a compelling player in the European real estate investment sector.

As 2025 unfolds, investors will be watching SEGRO’s ability to capture further rental reversion, secure high-value pre-leases, and capitalise on its data centre expansion strategy—key drivers that could propel the company’s next phase of growth.