SEGRO (SGRO) SHARES: 2025 PERFORMANCE IN UK, KEY DRIVERS, MILESTONES AND RISKS —'26 OUTLOOK

How did Segro (SGRO) shares perform in 2025?

Segro plc (LSE: SGRO), the UK-based real estate investment trust (REIT) specialising in logistics and industrial properties, delivered a mixed but ultimately resilient performance in 2025. As a bellwether for the warehouse and industrial property sector in the UK and Europe, Segro’s performance in 2025 was closely watched by investors amid macroeconomic uncertainties, interest rate fluctuations, and demand shifts within the logistics industry.

While Segro experienced periods of share price volatility, the stock ended the year with a moderate gain of approximately 4.8%, outperforming several other REIT peers weighed down by higher debt servicing costs and macroeconomic headwinds. Its full-year financial results, released in February 2026, pointed to a stable income profile with net rental income rising 5.1% year-on-year, driven largely by reversionary rents and newly completed developments across the UK and Continental Europe.

Key highlights from 2025 include:

• Steady Occupancy: Portfolio occupancy remained high at 94.8%, supported by long-term leases and consistent demand for urban logistics assets.
• Development Programme: Over £700 million of development projects were either completed or underway, including new logistics parks near London, Birmingham, and Manchester.
• EPRA Earnings: Earnings per share grew 3.4% to 27.1 pence, meeting guidance and underscoring the resilience of the portfolio.
• Dividend Growth: The company maintained shareholder confidence by raising its final dividend, resulting in a full-year increase of 4.5% year-on-year.

The relatively steady performance came despite a backdrop of elevated inflation in the first two quarters of the year and uncertainty over the Bank of England’s response through interest rate adjustments. While base rates remained elevated for most of the year, easing inflation from Q3 helped reassure markets, aiding share price recovery in H2 2025.

Investor sentiment towards Segro remained largely constructive, underpinned by its high-quality tenant base—including e-commerce retailers, 3PL providers, and manufacturing partners—and modern logistics properties with green credentials. Despite short-term macroeconomic pressures, Segro remained well positioned in the UK’s 'beds and sheds' real estate trend, favoured by institutional investors divesting from traditional retail assets.

The relative outperformance of Segro in comparison to traditional retail and office-focused REITs underscored the thematic strength of the logistics sector. Nevertheless, investors kept a cautious eye on development pipeline risks, financing costs, and broader economic indicators which could affect tenant demand and rental growth going forward.

Overall, Segro’s 2025 trajectory highlighted a combination of resilience and adaptability, supported by strong fundamentals and strategic asset positioning in and around key UK metropolitan hubs.

What are the main growth drivers for Segro in 2025?

Several structural and cyclical factors supported Segro’s operational strength and share performance throughout 2025. The company maintained its positioning within a niche but growing segment of the real estate sector, offering exposure to an asset class benefiting from both e-commerce growth and urbanisation trends.

The main growth drivers in 2025 included:

1. Continued Expansion of E-commerce

The lasting effects of post-COVID digital shopping habits sustained demand for fulfilment and last-mile logistics real estate. Major tenants, including Amazon, DHL, and local UK grocery chains, played a key role in driving warehousing demand. Smart warehousing, AI-powered inventory management, and automation underpinned long-term leasing activity—especially in urban-adjacent areas where land scarcity bolstered rental growth.

2. Supply Chain Resilience Initiatives

In response to 2022–2023 global supply chain disruptions, UK-based companies continued to reconfigure their inventory and logistics strategies in 2025. Onshoring efforts and the creation of decentralised distribution hubs across southeastern and central England drove demand for mid-size, flexible logistics space—a direct benefit to Segro’s development strategy and increased absorption rates.

3. Urbanisation and City-Proximity Logistics

With more than 70% of Segro’s UK portfolio located near major urban centres, the REIT continued to benefit from the growth of city-centric warehousing. Occupiers prioritised access to consumers within so-called "golden hour" distribution ranges, particularly around London, Manchester, Birmingham, and Glasgow.

4. Green and ESG-Compliant Infrastructure

Segro's properties increasingly featured sustainable design and energy-efficient features, aligning with tenants' environmental targets. The company invested in solar panels, rainwater harvesting, and EV infrastructure across many of its new assets. These green credentials strengthened tenant retention and allowed Segro to capture premium rental rates.

5. Balance Sheet Stability and Capital Discipline

Despite the high-interest-rate environment, Segro maintained a conservative financial profile. The average cost of debt remained below 3.2%, with relatively long-dated maturities and close to 90% of debt fixed or hedged. The REIT’s capital recycling strategy—involving the sale of non-core assets—also ensured liquidity while funding new developments.

Segro’s participation in joint ventures, including continued collaboration with Canada Pension Plan Investment Board (CPPIB) and other institutional investors, supported its development pipeline without significantly increasing leverage.

6. Supportive Real Estate Policy Environment

Changes in land-use planning laws in parts of England helped accelerate permissions for brownfield logistics developments. Local authorities in Greater London, the West Midlands, and Thames Gateway prioritised logistics investment to support employment and urban infrastructure, favouring developers like Segro.

These combined factors reinforced Segro’s strategic advantage within the UK real estate system, allowing it to sustain earnings, reinvest in its portfolio, and maintain dividend growth. Investor interest remained robust, especially among ESG-aligned funds and long-duration income-seeking asset managers.

What could impact Segro in 2026?

As Segro moves into 2026, its performance outlook is shaped by a blend of supportive trends and emerging headwinds. While long-term fundamentals remain compelling, several risks could challenge its trajectory. Investors evaluating exposure to Segro must weigh these carefully against the company’s historical asset management prowess and strategic positioning in logistics real estate.

1. Rising Vacancy or Tenant Defaults

Though occupancy levels remained high in 2025, any softening in tenant demand due to rising business costs or consumer spending slowdowns could pressure revenues. Segro’s diversified tenant profile offers protection, but smaller or new entrants into logistics could struggle in a slowdown scenario.

2. Structural Overbuild Risk

The rush to expand warehouse footprints—especially in the Midlands and Southeast—raises concerns about potential oversupply in secondary markets by 2026. While Segro has so far focused on high-demand, infill urban areas, competitors expanding aggressively could saturate local markets and weigh on rental values.

3. Monetary Policy Volatility

The Bank of England’s forward guidance suggests rate cuts could emerge in 2026 if inflation remains contained. However, volatility in bond yields or inflation surprises could roil REIT valuations widely, compressing capital availability for new developments and increasing refinancing risk across the sector.

4. Sustainability Regulation and CAPEX

While ESG strengthens pricing premiums and tenant appeal, evolving environmental building standards may require substantial retrofit capital expenditures. Regulatory tightening including updated EPC requirements by 2027 in England could necessitate accelerated upgrades, particularly on legacy assets.

5. Geopolitical and Trade Risks

Uncertainty surrounding UK-EU trade friction, shipping bottlenecks, and geopolitical tensions remain systemic risks affecting tenant profiles. Rising input costs, customs disruption, or reduced overseas investment into UK logistics could weigh on demand.

6. Share Price Valuation and Competition

As of year-end 2025, Segro was trading at approximately 1.15x NAV (net asset value), which, while reasonable, leaves limited margin for error. Growing interest in logistics REITs could heighten competition from both domestic and international players chasing similar yields and assets.

What to watch heading into 2026:

• Yield Curves: Changes in the gilt curve impacting real estate yields and REIT equity multiples.
• Planning Outcomes: Approvals for Segro’s large Thames Gateway and Midlands logistics hubs.
• Tenant Credit Health: Industrial and retail tenant reports signalling resilient operations.
• Monetary Policy: Signals of easing from the BoE may boost valuations.
• ESG Strategy Updates: Further detail on Segro’s Net Zero roadmap and property resilience.

Despite risks, Segro enters 2026 with robust fundamentals, attractive total-return potential, and a well-executed urban logistics strategy. Investors seeking defensive income exposure with growth optionality continue to see Segro as a core holding in the UK and European real estate landscape. The coming year will test how well the REIT can navigate tighter financial conditions while maintaining growth across a competitive logistics sector.