UPDATE 2-Segro says UK rental mkt still fragile

* New enquiries for space continue to fall in Q3 * Focused on reducing Brixton vacancies in mid term

* Segro shares down 2.7 percent

(Adds CEO and analyst quotes, share price)

By Daryl Loo

LONDON, Nov 5 (Reuters) - Europe's largest listed industrial landlord, Segro (SGRO.L), said on Thursday new enquiries for space continued to fall in the third quarter, although early signs of recovery have emerged.

"It's all a bit fragile still. We have seen since the end of the summer break enquiries that have been encouraging ... but I'm certainly not getting carried away," Chief Executive Ian Coull said in a conference call.

"There will continue to be pressure on enquiry levels and rents, because the general economic conditions have not completely turned around," he added.

By 0920 GMT, shares of Segro were down 2.9 percent, against a 1.4 percent fall in the UK property stocks index .FTNMX8730.

The company, which now has about two-thirds of its property portfolio in the UK and the remainder mainly in France, Germany and Belgium, said over the medium term it will focus on reducing the vacancy rate of the Brixton portfolio.

Segro, which took over indebted UK rival Brixton in August giving it a combined property portfolio worth 5.5 billion pounds ($9 billion), said its vacancy rate excluding Brixton's portfolio improved to 10.9 percent, from 11.3 percent.

Including Brixton, Segro's overall vacancy rate at end-September was 14 percent, it said.

STABILISING VALUES

With economic conditions across the UK and Continental Europe expected to remain demanding for some time to come, Segro said it plans to manage its business on a very prudent basis.

"The company deserves to be rewarded for its audacious acquisition of Brixton but the real estate cycle is not being shaped by micro or even macro drivers, but by government stimulus," Nomura property analyst Mike Prew said.

UK commercial property values staged the strongest rise in more than three years in September, after plunging 44 percent from their mid-2007 peak to hit bottom in July 2009, Investment Property Databank (IPD) data showed last month. [ID:nLE358649]