UK's Segro plans data centre strategy shift as AI booms

By Aby Jose Koilparambil

(Reuters) - Segro, which has historically offered data centres equipped only with power connections, plans to develop full-fledged facilities to directly serve major cloud providers like Amazon, Microsoft, and Alphabet's Google in a bid to shore up rental income.

The largest-listed European property company is looking to capitalise the surge in demand for data centres, a trend fuelled by the growing reliance on AI systems, which require specialised infrastructure like high capacity power supply and advanced cooling systems.

Typically, Segro leases out data centres to firms that add infrastructure such as chillers, generators, and dividing walls before sub-leasing to tech companies, which then add their own technology.

Under the new strategy, the London-based company will lease data centres fitted with required infrastructure directly to end users.

"A 'powered shell' might cost 50 million pounds ($62.9 million) to build, whereas a 'fully fitted' data centre could require around 500 million pounds. However, rental income could jump from 5 million pounds to 50 million pounds," Segro CFO Soumen Das told Reuters.

Segro currently earns about 650 million pounds in annual rent from its broader portfolio, and Das added that a single fully fitted data centre would have a noticeable impact on overall revenue.

The group, which mainly owns big box and urban warehouses among other assets, has 34 'powered shells', all in London and Slough, accounting for 8% of its overall portfolio.

The London- and Paris-listed firm said it is planning for its new data centres to also incorporate 'fully fitted' facilities, but did not provide additional details or a timeline.

However the new strategy comes with a trade-off, with Das saying fully fitted spaces would depreciate faster than the 'powered shells', potentially impacting long-term performance.

($1 = 0.7948 pounds)

(Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Tasim Zahid)