Proactive Investors - Run By Investors For Investors

London office market under threat from 'Brexit', says Deutsche

Lloyd's of London building and Cheesegrater
Deutsche remains cautious on capital's office market

Property stocks were under fire from Deutsche Bank as it warned of a potential corporate exodus from London after the 'Brexit' vote.

Deutsche downgraded Derwent London Plc (LON:DLN) and Intu Properties plc (LON:INTU) to 'sell', saying it remained cautious on the office market in the capital.

It also downgraded Land Securities PLC (LON:LAND) and Workspace Grp Plc (LON:WKP) to 'hold', although it upgraded Covent Garden owner Capital & Counties PLC (LON:CAPC) to hold.

It said it was premature to be relaxed on the potential impact of the referendum outcome.

Although the risks were already being priced in, Deutsche said it believed there was 30% extra downside to office-exposed shares.

The German broker said it saw several substantial risks to rents including the possibility of material office moves out of London due to the referendum.

It said in a note: "This has the capacity to increase vacancy to historical peaks and after speaking to numerous legal and political experts, we think this risk is under-appreciated."

Deutsche also cited macro-economic risk to demand for offices and developers adding to supply.

However, it said retail specialists such as Hammerson were still among its top buys.

Elsewhere, there were more downgrades as Jefferies International reduced Associated British Foods Plc (LON:ABF) to underperform after its trading update.

Jefferies said: "Despite the precipitous, FY IMS-triggered ABF sell-off, we remain concerned that the Primark investment debate will now revolve around

more normalised valuation criteria.

"With a third successive year of Primark margin falls now expected for 16/17, we value the division on 23x price/earnings and see double-digit downside to the stock."

Meanwhile, Citigroup downgraded HSBC Holdings PLC (LON:HSBA) to 'neutral'.

Phil-Waller.jpg


Register here to be notified of future DLN Company articles

No investment advice: The Company is a publisher and is not registered with or authorised by the Financial Services Authority (FSA). You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter. You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate. From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

© Proactive Investors 2019

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use