Monday 20/05/19

  1. In UK REAL ESTATE NEWS, London office construction and regional house prices buck Brexit gloom
  2. In HIGH STREET NEWS, Arcadia looks at closing overseas stores and Mike Ashley continues his Debenhams fight whilst Thomas Cook’s woes continue
  3. In MEAT NEWS, prices continue to climb but a Hong Kong entrepreneur has hopes for his vegan pork
  4. In OTHER NEWS, Richard Osman weighs in on the North/South divide. For more details, read on…



So London office construction and regional house prices weather Brexit…

Office construction in London highest since Brexit vote (Financial Times, Judith Evans and George Parker) cites the latest data from a Deloitte Real Estate report which shows that over 3.5m sq ft of new offices have started construction – more than any other time since the six months to March 2016 and over 40% higher than the previous survey. Over half of the space under construction has already been let to companies including Facebook and serviced-office groups such as WeWork. The report noted that activity was “remarkable, given the magnitude of political and economic uncertainty” during the period of the survey but also observed that sentiment was more muted, which “may indicate that construction starts are likely to fall in the next six months, due to businesses being more reluctant to commit to major spending decisions amid

market uncertainties”. * SO WHAT? * I always thought that there was a tendency for a mismatch in office construction and demand as major projects can take years to come to fruition, meaning that by the time it comes to construction, the demand that prompted the construction in the first place has often evaporated. Maybe clients a few years ago just assumed that Brexit wouldn’t actually go ahead and thought they would be able to get a good deal because of the Brexit uncertainty – but it’s difficult to tell. 

House prices up in regions with ‘fear factor subsiding’ (The Times, Elizabeth Burden) cites a different survey, this time from online property company Rightmove, which shows that although house prices in London have fallen by 2.5% over the past year average asking prices in Wales, the West and East Midlands and the North West are now at all-time highs. Miles Shipside, director of Rightmove, observed that “agents in these areas say that Brexit concerns are not really on the agenda of homemovers…they are more concerned with satisfying their housing needs. These increases are the result of a combination of strong demand, buyers’ affordability headroom and a continuing shortage of suitable properties”.



Arcadia ponders overseas store closures, Ashley continues his scrap with Debenhams and Thomas Cook tries to reassure after shares fall off a cliff…

Philip Green could close overseas stores as part of Arcadia rescue (The Guardian, Sarah Butler) shows that BHS staff favourite and all-round cuddly funster Sir Philip Green is thinking about closing down overseas stores as part of a plan to save high street fashion brands including Topshop, Miss Selfridge and Wallis. He is also looking at closing around 50 UK stores, cutting rents and pension fund payments. * SO WHAT? * The consequences are looking pretty bleak because if a deal isn’t done before the company’s next rental payment in late June, Arcadia could fall into administration. The company is trying to refinance a £300m mortgage on Topshop’s flagship Oxford Circus building that also houses Nike as part of the ongoing restructuring efforts and, if a remortgage is successful, it could release cash to pay off landlords and put into the business. Still, things aren’t looking great at the moment.

Moving on from one popular company leader to another, Ashley mulls legal challenge to Debenhams’ restructuring (Daily Telegraph, Ashley Armstrong) shows that Sports Direct CEO Mike Ashley is not giving up his pursuit of Debenhams as he is looking at challenging the company

voluntary arrangement (CVA) that was recently approved by creditors and saying that support for the proposals was unrealistically high. One source close to Sports Direct said that “The CVA votes – with one receiving 95pc support and 97pc for the other – bear more resemblance to the presidential elections in North Korea than they do a fair, open and honest process”. * SO WHAT? * Debenhams could probably do without this distraction, but I must admit I thought it was a bit strange that the CVA was so overwhelmingly approved. Maybe everyone just hates Mike Ashley – it’s not that unbelievable! It’ll be interesting to see whether Ashley succeeds in his attack on the company he recently owned a big slice of. I think that it’ll just be a blip for the time being for Debenhams – but if Ashley unearths foul play, things could get escalate rather quickly and Ashley may yet be able to bag himself a bargain in the ultimate Blue Cross sale ????

Thomas Cook says it is business as usual after Friday’s 40% crash (The Guardian, Sarah Butler) smacks of rearranging the deckchairs on the Titanic as the company has been forced to react to inquiries from worried holidaymakers and suppliers by saying that it has “ample cash to operate” after its share price fell to 12p – yes, that’s 12p – on Friday. * SO WHAT? * Thomas Cook is Atol-protected, so holiday makers should be fine – but the damage to the company’s reputation could yet bite. It is currently trying to sell its airline business to reduce debt, but it seems that Lufthansa and Virgin Atlantic are dragging their feet over any deal. Thomas Cook isn’t exactly in a strong bargaining position at the moment…



Meat prices are expected to rise while one man has high hopes for his vegan pork…

Meat prices are set to climb as swine fever claims China’s hogs (Wall Street Journal, Heather Haddon and Jacob Bunge) shows that the spread of African swine fever will result in deaths (from the disease and culling) of pigs that will account for around 5% of the global meat market. US Department of Agriculture (USDA) stats say that China may have to import 33% more pork this year than in 2018 to meet its domestic demand, leaving less meat in other markets. Tyson Foods’ (the biggest US meatpacker by sales) chief exec Noel White said that prices are already trending upwards and his company is currently trying to negotiate higher prices with retailers to cover the increased meat costs. McDonald’s and Wendy’s Co are expecting meat prices to go up, as does Dine Brands (which owns Applebee’s and IHOP), which expects chicken and beef prices to rise as meat-eaters look to get their animal-based protein fix elsewhere.

Step forward Inventor of vegan pork product hopes to cash in on China pig cull (Financial Times, Alice Woodhouse) as David Yeung, founder of Hong Kong-based

Right Treat, is hoping to plug the gap with his plant-based pork product and emulate the success of Beyond Meat and Impossible Foods. Yeung has developed “Omnipork” (!) from a mixture of pea, soy and mushroom proteins and has plans to launch it in China later this year. It seems that the difference between his product and Beyond Meat and Impossible Foods’ is that his is “unfinished” and can therefore be used in recipes (the former two have “finished” products like sausages and burgers). Omnipork was launched in restaurants in Hong Kong in April 2018 and is now sold in Singapore, Thailand and Taiwan. He clearly launched it in the right market as Hong Kong has one of the highest levels of meat consumption with the average person eating 664g per person per day, with daily consumption of pork and beef four times that in the UK! * SO WHAT? * This sounds brilliant, no? And talk about a stroke of luck as the launch will coincide with the African swine fever thing (although not so lucky for the pigs, obviously). I don’t know what it looks like or what the texture is, so I can’t really say whether it will definitely be a hit or not. Still, another plant-based protein source can’t be bad – and the fact that this stuff is “unfinished” means more versatility, which could turn into more popularity. If the Chinese can get their heads around this, I think Omnipork could be massive!



And finally, in other news…

I thought I’d leave you today with the latest in the North/South debate in Richard Osman ignites fiery ‘Where does the North begin?’ dispute and no one can agree (The Mirror, Zahra Mulroy I’m thinking where “barth/bath and grarse/grass” starts…

Some of today’s market, commodity & currency moves (as at 0813hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq *DAX *CAC-40 *Nikkei **Shanghai **
7,349 (-0.07%)25,764 (-0.38%)2,860 (-0.58%)7,81612,239 (-0.58%)5,438 (-0.18%)21,302 (+0.24%)2,871 (-0.41%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

(markets with an * are at yesterday’s close, ** are at today’s close)