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Property powerhouses Hammerson and Segro say demand remains 'fragile'

Two of the UK's biggest property companies have provided fresh warnings about the health of the economy after reporting that business demand for new commercial space remains fragile.

Two of the UK's biggest property companies have provided fresh warnings about the health of the economy after reporting that business demand for new commercial space remains fragile.
Hammerson, whose portfolio includes the Bullring shopping centre in Birmingham, said consumer spending in its centres had been impacted by Government austerity measures and above-target inflation. Credit: Photo: ALAMY

Segro, the warehouse owner, said its vacancy rate increased from 12pc to 12.1pc in the three months to March 31, with London and the South East "resilient" but the rest of the UK suffering from "more challenging economic conditions".

Meanwhile, Hammerson, whose portfolio includes the Bullring shopping centre in Birmingham, said consumer spending in its centres had been impacted by Government austerity measures and above-target inflation.

Its occupancy rate slipped from 97.3pc to 96.7pc, below its 97pc target, although David Atkins, chief executive, said Hammerson is benefiting from its focus on "regionally dominant shopping centres and convenient retail parks".

Like-for-like sales at its centres in the UK rose 1.5pc in the first quarter and Hammerson secured 48 new rental deals, including Jaeger at Brent Cross and Primark at Queensgate in Peterborough.

Alan Carter, property analyst at Evolution, said: "Whichever way you cut it, the retail market is tough, but there is no doubt that quality retail assets perform relatively at their best the tougher the market is. Retaining occupancy is probably more important than trying to grow rental values this year."

Hammerson closed up 1pc at 470.1p, while Segro also rose 1pc to close at 325p.

David Sleath, who took over from Ian Coull as Segro chief executive at Thursday's annual general meeting, said: "Occupier market conditions continue to be challenging as issues such as sovereign debt worries, the austerity measures in the UK and rising energy prices impact sentiment with many customers remaining focused on cost control and the consolidation of their space requirements."