July 2010 Archives

Analysts at JPMorgan Cazenove are expecting a "sharp slowdown" in capital growth following Great Portland's interim management statement late last week.
In a note analysing the company's news, JPMorgan said it expects any further gains to come from rental growth, not yield shift, and say Great Portland's own outlook is for a "less urgent mood" to persist over the remainder of the year.
The broker said Great Portland's IMS was "bang in line with our expectations" with NAV of 295p compared with its expectations of 296p, driven by 4.6% capital growth in the quarter.

Following the company's conference call with analysts, JPMorgan came back with these points:

Legal & General Investment Management has warned that expected government policy tightening threatens to send the UK economy back into recession in 2012.
At the company's monthly Fundamentals briefing, economist James Carrick said: "The sharp cuts in public spending that the government made in the recent emergency budget represent the largest fiscal tightening since the Second World War.
"Government figures suggest the gap left by these cuts will be filled by the biggest private sector boom ever - given how tight lending conditions remain, this is far too optimistic."
LGIM said its research suggests a 10% chance that year-on-year (YOY) economic growth is negative in a year's time and that probability rises to 33% for 2012.
Since these figures are calculated YOY, it suggests that the UK economy may begin contracting as soon as the second half of 2011.
Carrick says the economy is not yet strong enough to have the 'automatic stabilizers' of low taxes and high spending removed.
The company predicts that official interest rates will be unchanged at 0.5% throughout next year.

Research firm Capital Economics has released an update today on the UK commercial property market saying it believes yields are now close to a floor based on recent data from IPD and Strutt & Parker on leases.

Economist Kelvin Davidson says:

With the economy in recession for much of 2009, the latest data from Strutt & Parker and IPD suggest that landlords fared reasonably well last year, retaining a high proportion of tenants and in many cases even raising rents at lease expiry. Given that the economic backdrop remains fragile, however, we doubt that investors will feel confident enough about the near-term security of income streams to lower risk premiums. Thus, our view is that property yields are now close to a floor.

• The S&P/IPD Lease Events Review mainly focuses on factors which affect the income streams accruing to landlords from existing leases, e.g. the use of break clauses, changes in void rates and duration, tenant defaults etc. One positive result for landlords to come out of the latest review was that 38% of leases expiring in 2009 (weighted by rental value) were renewed by the existing tenant, slightly higher than 2008's result (33%) and well above 2007's figure of 17%.