(Bloomberg) -- For the first time since the Bank of England began its aggressive hiking cycle at the end of 2021, UK warehouse values have returned to growth, according to landlord Segro Plc.
Europe’s largest publicly traded landlord saw the valuation of its UK portfolio grow by 0.9% in the six months through June, according to a statement Friday. Overall values were flat at £17.8 billion ($22.9 billion) as its European properties continued to fall, albeit at a slower pace. The return to growth was driven by like-for-like rents that were 5.3% higher and the company’s overall net rental income 7% higher.
Surging ecommerce demand and the recalibration of supply chains in the aftermath of the pandemic has continued to lure investors into industrial property even as higher rates weighed on the sector’s elevated valuations. After a two-year correction, steady rental growth has finally offset the impact of higher borrowing costs in the UK, where values adjusted to the new macroeconomic landscape most quickly.
“The balance of supply and demand for modern warehouse space remains supportive of further rental growth and development gains,” Segro Chief Executive Officer David Sleath said in the statement.
The company’s net asset value was down 1.8% to 891 pence, due mostly to the impact of an equity placing. It has fallen more than 28% since peaking at 1,249 pence a share in June 2022 when the company’s portfolio valuation topped £20.5 billion.
Segro shares are up about 2.35% this year but remain more than 36% below their level at the start of 2022 when the hiking cycle took hold.
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