F.Or think of gleaming skyscrapers, shiny office buildings or fashionable shopping centers; Large sheds are the order of the day for commercial real estate. Warehouses may not be sexy, but they have proven extremely lucrative in the emerging world of e-commerce.
Most consumers will never have heard of Segro, but it will have touched their lives. Items they use every day may have passed their warehouses: huge landmarks of an online boom that made them the UK’s most valuable real estate company.
“We will Everyday. It could be a coffee mug, or it could be something you downloaded to your phone and passed through a data center, ”said David Sleath, CEO of Segro, who sits in a boardroom at the company’s Mayfair headquarters off Regent Street . “We create the space to make the extraordinary possible,” he adds without any irony.
There is something extraordinary about Segro’s rapid development, from his humble roots as a Slough Estates Group to a $ 17 billion US golf course that has grown into a serious gamer.
This high status can be traced back to Sleath’s decision to invest heavily in warehouses and commercial property when he took office a decade ago. During his tenure, the company rode the online retailing wave to overtake competitors with high profile assets like Land Securities and its Bluewater shopping complex in Kent.
Few would have spent money on Segro climbing to where it is today; Sleath might not have himself either. The affable 60-year-old was initially something of a reluctant boss and unsure whether he wanted to be promoted to CFO after five years. “I didn’t necessarily see myself as a natural manager,” he says. One of the aspects of running a company that you didn’t like was newspaper interviews, he laughs.
“I thought there was good business in here, trying to get out,” he recalls. “The company had a decent portfolio but was having trouble figuring out where was it going?”
The glass and polished wood Mayfair office, with meeting rooms named after innovators like Turing and Newton, feels like a world away from the colossal gray cathedrals of consumerism that have sprung up along Britain’s main streets for the past two decades. Segro was responsible for developing and renting warehouses to companies like Amazon and Netflix.
As a fan of Mark Twain, Sleath quotes the author’s maxim “Buy land – you can’t make it anymore” and has taken it to heart. Segro owns and manages 8.8 million square meters of space – that’s three times the size of the City of London. It has an additional £ 1 billion of land that has yet to be developed. Logistics, he says, is “unseen, unnoticed”, but its smooth functioning is crucial, as the supply chain crisis has shown.
When Sleath took over ten years ago, many doubted his plan to focus on the industrial real estate needed for e-commerce. Was it luck or was it design?
“I would like to say that even in 2011, when we launched the strategy, we could see exactly what would happen to Amazon and how it would become a major engine of e-commerce and inventory demand . “Place,” says Sleath. “But the truth is that we probably all bought some things on Amazon and we were aware of them, but as Segro we hadn’t done a lot of business with them and didn’t really see them as major players in our core markets. At that point in time they were mostly building very large warehouses in fairly remote locations where labor and land were cheap. “
Slough, Segro’s humble birthplace on the western edge of London – a place where the Mars bar was invented and, more recently, the location of the television series The office – Fits Sleath’s reserved manner. He describes himself as an “accountant” but is highly regarded in the real estate industry, according to analysts. Segro remains the owner of the property where it all began – today the largest private industrial park in Europe with tenants such as DHL, Ferrari and O2. Not bad for a company that was once nicknamed “Slow Grow” by Citywags.
Sleath was educated in Swansea after his father moved the family from England to work at the local Ford plant. There is no trace of a Welsh accent, though there is a love of rugby, despite supporting England. After studying accounting at the University of Warwick, he worked as an accountant for Arthur Andersen for 17 years before moving to the finance director of the engineering firm Wagon. He has built a sizable fortune from Segro’s boom: his stocks and options are worth more than £ 21 million.
Segro’s latest plans include multi-story warehouses. Critics argue that soulless sheds do little for the British countryside, exacerbating the decline of the country’s high streets and a throwaway consumerism. Sleath is not convinced. “Ultimately, the consumer decides what is built and what is needed,” he says. “We try to make this possible: We think very carefully about what we are building and where we are building it.”
The demand for logistics hubs was booming even before the pandemic, but space has never been so tight since Covid. Delivery delays and disrupted supply chains have resulted in companies asking for additional inventory so they can keep more inventory close to their factories and stores. Fears of a disorderly Brexit increased this demand.
According to Jonathan de Mello, partner at the independent retail property consultancy CWM, transactions have been agreed for around 1.2 million square meters of warehouse rentals in the UK in the past few months. That equates to 80% of the space rented for all of 2020, and London remains particularly sought-after.
Meanwhile, analysts for the stockbroker Liberum reported in the summer that the availability of warehouse space was lower than ever.
It’s not just retailers who are looking for warehouses, says Sleath: “We have a lot of last mile delivery facilities and parcel hubs. But we also have food manufacturers, we have media companies that store their theater production equipment. “
Many of the goods ordered online for Black Friday can at some point pass through Segro’s warehouses on their way to the buyers, which usually do not notice their existence.
This is not important to Sleath, who does not care about his poor profile – or his company – as he expresses the maxim of every accountant. “I really enjoy flying under the radar, to be honest: I think ‘let the numbers do the talking’.”