Please see below for AJ Bell’s latest market updates, published 09/10/2020 and received over the weekend. The daily market update is written by Russ Mould, AJ Bell’s Investment Director and his team. The article highlights the current position with UK real estate:
British Land
“As an investor in many different types of commercial property British Land is a good bellwether for UK real estate.
“This is why its positive trading update, with rent collection trending in the right direction and the decision to reinstate the dividend, is firing shares in several of the London market’s property stocks on Friday.
“Particularly notable is the recovery in retail – with figures suggesting footfall and sales across its portfolio of shops and shopping centres weren’t too far off pre-Covid levels in September.
“The company has also managed to sell some retail assets above book value – though it looks like these are in more robust areas of retail like large standalone DIY stores.
“So far, the tighter restrictions being brought in don’t appear to be having an undue impact on shopping, though weakening consumer sentiment won’t help.
“And the CVAs dreaded by landlords are a growing menace for British Land as troubled retailers look to reduce their rent bills.
“In a sign the business might face a longer term problem with its offices – occupancy here is way, way down as you might expect given the Government U-turn from ‘return to work’ back to ‘work from home if you can’.
“The question is whether there is a tipping point at which office tenants decide they no longer require a large central hub for their workers.
“We are probably not there yet, but what could happen is a shift away from sites, like those in central London, where there is a reliance on public transport towards locations outside city centres which have plenty of car parking.
“Ultimately there are arguments for businesses retaining their offices in the medium term. After all, working from home isn’t a viable option for everyone, more space might be required to comply with distancing requirements and there are advantages to having people physically on site, particularly new starters.”
Commercial property is a key diversifier for investor’s portfolios. Good bricks and mortar property funds work well over the long term but have liquidity issues hence some peoples’ preference for property shares.
Please keep using these blogs to keep your market views up to date and holistic.
Stay safe and all the best
Paul Green
12/10/2020