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SEGRO builds on close ties with Amazon

U.K. industrial real estate investment trust SEGRO Plc is planning more work with Amazon.com Inc. after delivering several major logistics hubs across Europe for the e-commerce giant in 2017, CEO David Sleath said during an earnings call.

Amazon, which has led the e-commerce revolution and become one of the largest companies in the world by market capitalization, is now SEGRO's second-largest customer.

"Amazon [has] been pitching [to us] very heavily over the last year or two," said Sleath. "And in 2017, we delivered buildings for them in Rome, in the [U.K.] Midlands, Barcelona, London and Munich. And you'll be seeing us do more business with them this year."

SEGRO is also seeing growing demand from Amazon's competitors, such as Yoox, said Sleath. "The parcel delivery partners of these online retailers have also continued to be very active, particularly now as the battle for last-mile delivery hops up. And we've seen good demand from discount grocers and from traditional retailers seeking to respond to the online challenge," he said.

Rising demand for SEGRO's space helped the REIT record a 2.6% increase in like-for-like net rental income in 2017 to £220.7 million. Adjusted earnings per share for the year amounted to 19.9 pence, a rise of 5.9% from 2016.

The transformation that e-commerce and other digital businesses have driven in industrial and logistics real estate is only now being recognized by some investors, Sleath said. "The investment world has been relatively slow to realize that industrial ain't what it used to be," he said. "Now it's not old manufacturing on the wrong end of the decline of western European manufacturing; it's actually internet retailing, and data centers, and last-mile delivery. And the whole change — societal change — that is happening is having a massive positive impact."

Sleath dismissed concerns around the potential impact of Brexit on SEGRO's business, noting that the vast majority of the company's portfolio is related to inward consumption in the U.K., and he reiterated what has become SEGRO's standard response to such concerns: "Internet trumps Brexit."