Segro, the UK's largest industrial property owner and developer, warned today of a tougher market ahead for the value of warehouses, offices and shops, as it turns into a "net seller" of British property.

The warning from Segro's chief executive, Ian Coull, echoes earlier comments from the heads of British Land and Land Securities, Britain's two largest office and retail property owners, that prices of so-called secondary assets were already falling.

Flush with cash from the recent $2.9 billion sale of its US portfolio, Segro is ploughing its money instead into continental European projects, where the company expects far swifter gains on capital values than in the UK.

Mr Coull's comments and company strategy will do little to assuage fears that swaths of Britain's £700 billion commercial property market will see sharp price falls over the coming 12 months.

Investors have finally woken up to the so-called negative yield gap in the UK, where the cost of borrowing is now on average about 1 per cent higher than initial returns from commercial property.

Delivering a 27 per cent rise in interim trading pre-tax profit to £86.5 million, Mr Coull said the company had been a "net seller" in the UK, managing to sell off £170.7 million of investment properties at a 2 per cent premium over their book value.

The conversion of the company to a tax-friendly real estate investment trust (Reit), removing capital gains tax, had in part helped Segro to speed up its disposal programme.

But Mr Coull added that the acceleration of disposals was "also driven by our assessment that market conditions in the UK will see lower general levels of capital growth than those we have experienced in recent years".

Conversely, in continental Europe, which now accounts for 14.2 per cent of Segro's £4.413 billion of property assets, Mr Coull said: "We are continuing to find very attractive acquisitions ... where we can explot the still very positive gap between investment and development yields and the cost of borrowing."

The company has 2.2 million square metres of developments in the pipeline, the largest of any UK-based industrial developer, but tellingly two thirds of that sits in continental Europe.

At a group level, Segro pulled in 143,000 square metres of new lettings during its first six months to 30 June, a rise of 46 per cent on this time last year, adding £8.4 million of new income.

Net rental income, discounting the sale of its US business, rose from £93.7 million to £96.9 million. UK vacancy rates were stable at 11.6 per cent of total space under management, while in Europe vacancies fell from 8.2 per cent to 6.5 per cent since 31 December.

Converting to a Reit has enabled Segro to pass on more of its profits to investors, allowing the interim dividend to rise 20.3 per cent to 8.3p per share. The full-year dividend is expected to show a similar increase.

This month investors also bagged a 53p per share dividend paid out as part of the £250 million cash back from the US sale.

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