Armed with senior promotions to broaden its reach in the UK and Continental Europe, the firm is eyeing expansion on all fronts.
Marco Simonetti, former managing director of Segro’s Southern Europe business unit, has been promoted to managing director, Continental Europe, as part of a raft of management changes designed to foster further expansion.
His peer, James Craddock, has been promoted from managing director of Segro’s Thames Valley business unit to managing director, UK.
The two promotions, which took effect in July, see the leaders assume new responsibilities in the wake of the retirement of Segro chief operating officer Andy Gulliford.
The appointments are also a response to the ‘significant growth’ of recent years, as Simonetti explains: ‘Segro now has over €21 bn of assets under management’. The pair has joined the firm’s executive committee, which has expanded from four members to seven.
While the UK and Continental European markets are distinguished by quite different opportunities and challenges in the industrial and logistics space, Simonetti’s brief – covering the seven countries of France, Germany, Spain, Italy, the Netherlands, Poland and the Czech Republic – represents an even more diverse mix of languages, regulations, requirements and land availability.
For Simonetti, whose prior focus was France, Spain and Italy, the new role involves appraising what has already been done in each of the seven markets – and what can still be done. ‘In some of the countries, like France, we’ve been operative for over 50 years, and we have granular teams across everything from urban opportunities to big boxes,’ Simonetti notes. ‘We would like to do more in the Czech Republic and the Netherlands, both of which are very established logistics markets due to their key locations. Clearly there is a lot of competition in both and a difficulty to find land.’
Discernment also means seeking growth in the right sub-sectors. ‘In France and Germany, our biggest markets, we have portfolios which are well balanced between light industrial and last mile. In Spain and Poland, there has been a greater focus on big boxes to date, with less light industrial and last mile,’ he says. ‘For Italy, we are already strengthening last mile in Rome and Milan, but we probably won’t explore that segment in other Italian cities.’
Segro can, however, count on strategic land banks that it has amassed over the past five years in what Simonetti describes as ‘very prime locations in key markets’. These resources are underpinning Segro’s ongoing development push, with some 700,000 m² of assets under construction or under discussion for potential pre-let across Europe, including the UK. Speculative development has also remained an active part of the business, focused on those markets where supply is extremely scarce.
‘If we start developing projects in markets where there is essentially no available space, we usually sign a lease before the project is completed,’ he notes. ‘That has consistently happened in Germany, France, Italy and Spain.’
Another bonus for the firm’s development arm is the improving environment for construction, with materials costs starting to ease after a tricky couple of years. Despite this, Simonetti acknowledges that the macroeconomic climate has caused something of an uphill struggle in recent times. ‘In the first six months of this year we saw slight falls in the value of our portfolio,’ he notes. ‘Clearly, there was a big correction in 2022 in logistics pricing, as in other asset classes. However, today, values are stabilising.’
According to Simonetti, yield movements have been minimal although rents are continuing to rise. ‘For a while, we didn’t see rental growth on the Continent, but we currently see steady increases in all markets. Many of the structural drivers that were present during the pandemic are still around, such as e-commerce, nearshoring and onshoring and urbanisation.’ Supply remains generally constrained and transactions are happening again, he says. ‘I think we are coming back to 10-year type averages in investment and occupation. A lot of the data is similar to pre-pandemic levels. But everyone feels a little more confident about the future.’
Another aspect where Segro feels in sync with its occupiers is the area of environmental, social and governance (ESG) matters. ‘Sustainability has been top of our agenda for many years, but we are now seeing that it is at the top of customer agendas too,’ he observes. ‘There is no deal or discussion where we don’t address how we can improve the sustainability metrics of a building. Having green assets has really become a must.’ Simonetti adds: ‘We also feel we have a significant role to play when we are investing in a community, so we seek to add real value. That can mean working with local schools, striving to nurture diverse talent, helping the long-term unemployed return to the workplace.’
Segro is also taking a pioneering stance in developing an increasingly diverse range of asset types under the industrial umbrella. ‘Data centres is an area in which we have established ourselves as leaders in the UK,’ he underlines. ‘We have developed all the data centres on the Slough Trading Estate, which is the second largest data centre cluster in the world.’
The firm is now seeking to develop data centres across the Continent, in response to their powerful demand dynamics. ‘We are developing a data centre in Rho, on the fringes of Milan,’ Simonetti says. ‘We are also working on others in France and Germany, whilst looking at the Netherlands too.’
Another growth area involves a sophisticated and granular look at urban logistics, with the appointment of specialised teams in London and Paris to solely pursue these opportunities.
In Paris, this means bringing to completion the ambitious underground conversion of the former Gobelins railway yards, and another scheme comprising 8,000 m² of space within walking distance of the Eiffel Tower. ‘If we can deliver these kinds of schemes in a city with some of the highest density demographics in the world, then we’re doing something right,’ he affirms.