- In NEWS ON REAL ESTATE TRENDS, we look at high-rise-to-low-rise, UK estate agents fearing boom-bust, potential first-timer difficulties and the surge in warehouse demand
- In CORONATRENDS NEWS, we see that WFH increases work time, benefits cybersecurity providers and cloud computing while we order takeouts but restaurants remain concerned
- In FINANCIALS NEWS, ABN Amro plans to downsize its investment bank and NatWest announces cuts
- In INDIVIDUAL COMPANY NEWS, Liberty Global buys Sunrise for $7.4bn and Tesla does a stock split
- AND FINALLY, I bring you an uncanny Michael Jackson look-a-like…
NEWS ON REAL ESTATE TRENDS
So we take a look at trends for offices, residential and warehousing…
*** TODAY’S THURSDAY – which means that it’s the day for my Zoom call with you! I will go through some of the week’s key business and financial news and then, as usual, open it up to questions from YOU! Click HERE for the details. See you at 5pm! ***
Shift predicted from city skyscrapers to low-rise suburbia (Daily Telegraph, Rachel Millard) cites commercial property landlord CLS Holdings as saying that it expects stronger demand for more vertically challenged offices versus densely-packed sky-scrapers. CFO Andrew Kirkman highlighted the need to have windows and less reliance on elevators as well as a trend for companies to go to the suburbs so that staff can avoid public transport. REI built an elaborate HQ. Because of Covid-19, the outdoor retailer wants to sell it (Wall Street Journal, Konrad Putzier) is a great example of this already happening as Recreational Equipment Inc as it is looking to ditch its custom-made new HQ in Seattle to let staff work from home or from other offices – before even moving in! * SO WHAT? * I think it would be fair to say that many companies have been surprised at how effective working from home (WFH) has actually been. Facebook’s Mark Zuckerberg said that he expected 50% of the firm’s staff to work remotely within the next ten years and Twitter’s chief exec Jack Dorsey said in May that most of his employees would be allowed to work from home indefinitely! It may be too early to predict the permanent demise of the skyscraper – after all many predicted this (understandably) in the wake of 9/11, but then demand actually picked up pretty quickly. Still, the drivers behind potentially weaker demand are different this time around. I know this sounds really shallow, but I still think that there will be demand for such offices because many people like working in a cool building rather than slobbing around at home in their pants (commuting aside). There is definitely something to be said for everyone working together in terms of collaboration and camaraderie and I think it’s particularly useful (and more enjoyable) for younger members of staff to work in an office because you can learn much more quickly and feel a sense of belonging.
As far as residential property is concerned Bust will follow property boom, fear agents (Daily Telegraph, Isabelle Fraser) cites a poll conducted by the Royal Institute of Chartered Surveyors (Rics) which highlights estate agent concerns that the current surge in interest in property –
prompted by Rishi Sunak’s recent lowering of the stamp duty threshold – will evaporate when the “holiday” and furlough come to an end. House price fall will not benefit from first-time buyers, says thinktank (The Guardian, Richard Partington) cites the findings of the Resolution Foundation thinktank which conclude that first-time buyers will find it incredibly hard to scrape together enough money to get a deposit even if predictions from the Office for Budget Responsibility (OBR) are correct in that property prices could fall by 21% by Q3 of 2021. In the 90s, an average couple saving 5% of their income every year could get enough for a deposit in four years – it would now take 21 years! * SO WHAT? * This all makes for depressing reading and, coupled with the prospect of falling incomes during recession, it looks like things are set to get worse. Tighter conditions for taking out mortgages at the moment – which largely negate the influence of the “bank of mum and dad” – are making a tough job even tougher. I think that the government is going to have to step in to address this at some stage, but the priority may not be right now as they will probably want to concentrate on other aspects of the economy at the moment.
Investors ‘back with a vengeance’ as warehouse demand surges (Financial Times, George Hammond) shows that things are rather different in the world of warehousing versus the carnage going on on the high street and shopping centres. E-commerce has just exploded, prompting a rush for warehouse space for “last-mile” delivery sites in city centres and out-of-town “big-box” distribution centres. Amazon has been buying up loads of space around the world and will be opening 33 “fulfilment centres” in the US alone this year. Fashion retailers with limited online capability have also been looking for space to store stock that they couldn’t sell during the pandemic. Property group CBRE said that the take-up of logistics space in the UK shot up to record highs in Q2 – not surprising since figures from the Office for National Statistics (ONS) say that e-commerce accounted for 33% of all retail sales in May versus 19% in February and 6.7% ten years ago. Fun fact from CBRE: every extra £1bn spent online needs almost 900,000 sq ft of logistics space. Prologis estimates that for every $1bn spent on e-commerce in the US, 1,200,000 sq ft of space is needed. * SO WHAT? * The sharp rise of e-commerce has upended traditional thinking on real estate as malls WERE the most desirable kind of property to own but now warehousing is where it’s at. In June 2010, Segro’s market cap was shy of £2bn but it is now worth £11.8bn and the largest UK-listed property group by far – a complete contrast with, say, Intu, which has collapsed. Asset managers and private equity firms are piling into logistics sites and are raising more money to keep doing so.
We take a look at WFH trends and high street worries…
You’ll work a month more if you WFH (The Times, Callum Jones) cites findings from a study by Atlas Cloud which shows that people working from home (WFH) will do the equivalent of one extra month’s work every year whilst gaining almost 26 days in time off if they continue with habits developed during lockdown. They have saved 84 minutes on average every day by WFM and not commuting and have divided that saving almost equally between additional work and other activities! Fun fact: the chief exec of Atlas Cloud is called Pete Watson. What a great name 😁😍! * SO WHAT? * OK, so Atlas Cloud is a tech specialist that helps people work remotely and is therefore somewhat biased HOWEVER, I think its findings are fascinating. According to its survey, 90% of office staff want to be able to work from home in the future but only 26% want to do so ALL the time. This is something that ALL companies will be considering right now in terms of future planning.
Working from home has really helped the fortunes of a number of companies. Avast secures revenue boost from work-from-home rise (Daily Telegraph, Matthew Field) shows that the cybersecurity company – which provides free to use and subscription cyber security tools – saw increased revenues for the first half and Foxconn profits jump 34% as cloud computing demand surges (Financial Times, Kathrin Hille) shows that one of Apple’s biggest
suppliers saw a massive jump in net profits over the second quarter as demand for computers and cloud computing equipment offset weaker smartphone sales.
In terms of eating habits, Just Eat tucks into captive market amid pandemic lockdown (The Times, Dominic Walsh) shows that Just Eat Takeaway.com (which announced a $7.3bn takeover in June of US operator Grubhub to make it the biggest meal delivery company outside China) has benefited from us tucking into takeaways under lockdown and Just Eat Takeaway: meal plan (Financial Times, Lex) highlighted its aggressive investment plans and the fact that it could fare better than its rivals because it 9,000 couriers in Europe are already treated as employees and have contracts – something that rivals are currently fighting about in court.
Meanwhile, Covid halves July sales in UK pub, bar and restaurant chains (The Guardian, Mark Sweney) cites figures from Coffer Peach which show that sales at pubs, restaurant and bar chains were half the levels they were at in July last year and, understandably, UK restaurants enjoy further boost but fret over end of discount scheme (Financial Times, Alice Hancock), which I think means that the industry will be pushing hard for an extension to the Eat Out To Help Out initiative. * SO WHAT? * There will undoubtedly be a drop-off in activity when schemes like this end but they cannot go on forever. The key will all be in the timing as clearly people want to eat out – bookings have been very strong since the current scheme started.
ABN Amro and NatWest announce cuts…
ABN Amro to slash size of investment bank (Financial Times, Nicholas Megaw) highlights the intention of Dutch bank ABN Amro to downsize its corporate and investment banking business as a number of instances of losses due to excessive risk-taking have been magnified by the ongoing economic effects of the coronavirus. * SO WHAT? * Shares in the bank rose by 8% on the news but this is the second restructuring in two years, so I wouldn’t get too excited.
In the UK, NatWest to axe 550 branch jobs and close London office (Daily Telegraph, Lucy Burton) heralds the latest move by a high street bank to resize its operations in response to covid and evolving consumer behaviour. This follows only days after rival TSB announced it was going to cut its cashiers. * SO WHAT? * These kinds of moves were already happening before the pandemic as banking operations have increasingly gone online. Covid has just brought forward what was probably going to happen anyway – but this is no comfort for those who have been affected.
INDIVIDUAL COMPANY NEWS
Liberty Global goes shopping and Tesla does the splits…
Liberty Global to buy Sunrise in $7.4bn Swiss telecoms deal (Financial Times, Patricia Nilsson and Nic Fildes) shows that the US telecoms company has made a bid for Sunrise, creating a stronger player in the Swiss market. It will be the latest in a string of deals in the sector that combine broadband and mobile assets (e.g. Virgin Media and O2 that was announced earlier this year). * SO WHAT? * Swisscom controls over half of Switzerland’s broadband and mobile subscription market, according to investment adviser Jefferies, and so the Liberty Global/Sunrise combo would provide a stronger opponent even though the enlarged group would “only” have a 30% broadband and 25% mobile market share.
Tesla’s stock split is likely to send the share price even higher (The Guardian, Patrick Collinson) highlights a stock split on Tuesday evening that means that each existing share gets split into five shares. There’s no change in valuation per se – it just means that instead of paying $1,500 per share, you will pay $275. * SO WHAT? * What this does is it makes it easier for retail investors to get involved – and if you increase the potential investor base, usually the share prices go up even further. This happens quite a lot – Apple and Google are among those who have gone down the same road as their share prices have gone off into the stratosphere!
…in other news…
I thought I’d leave you today with a story that I saw a couple of days ago: Teen who’s told she looks like Michael Jackson says she ‘sees the funny side’ (The Mirror, Luke Matthews). The resemblance is uncanny 😱!
Some of today’s market, commodity & currency moves (as at 0754hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!
|FTSE 100 *
|Dow Jones *
|S&P 500 *
|Oil (WTI) p/b
|Oil (Brent) p/b
|Gold Per t/oz
(markets with an * are at yesterday’s close, ** are at today’s close)