Is London’s office market a bargain?

Private-equity groups are swooping on London’s property companies, which are trading on steep discounts to net asset value.

New York’s commercial property is in trouble, say Julia-Ambra Verlaine and Sebastian Pellejero in The Wall Street Journal. Last month only 10% of office workers in Manhattan had returned to their desks. The pain could spread beyond New York. Wall Street “slices” property loans and packages them as commercial mortgage-backed securities. Pension funds and asset managers worldwide participate in this “half-trillion-dollar” debt market, but prices are falling. Some lower-rated US commercial mortgage bonds are trading on between “70 cents to 50 cents on the dollar”.

London property is also in crisis, but these “comatose days” for offices “will not last forever”, says Jim Armitage in the Evening Standard. Post-pandemic, people will probably still head go to the office at least a few days a week. “Canny private-equity groups” such as KKR are swooping on London’s property companies, which trade on steep discounts to net asset value. Yet their focus is limited to firms with office exposure. The outlook for retail space is much grimmer. 

London’s offices are suffering from “unprecedented uncertainty” because of the rise of homeworking, says a UBS Research note. But big companies may end up reducing their requirements for space less than expected. Steep discounts to net asset value and proven management teams mean that Derwent London (LSE: DLN) and Great Portland Estates (LSE: GPOR) could interest brave investors.

Recommended

Chase Coleman: star hedgie hits the panic button
People

Chase Coleman: star hedgie hits the panic button

Chase Coleman got off to a sizzling start in the hedge-fund industry and became one of the biggest winners of the tech bull market. His fall from grac…
28 May 2022
How the West can win Putin’s war on food
Global Economy

How the West can win Putin’s war on food

The West could easily make up the shortfall if it let the free market rip, says Matthew Lynn.
28 May 2022
Which companies will lose the most from the energy windfall tax?
Energy stocks

Which companies will lose the most from the energy windfall tax?

The government’s new energy windfall tax has muddied the waters for investors and companies alike. Rupert Hargreaves explains how it might affect some…
27 May 2022
The MoneyWeek Podcast with Russell Napier at the Library of Mistakes
Investment strategy

The MoneyWeek Podcast with Russell Napier at the Library of Mistakes

Merryn talks to Russell Napier about Edinburgh’s Library of Mistakes, the age of debt and financial repression, plus why he has never invested in Chin…
27 May 2022

Most Popular

Scottish Mortgage Investment Trust has fallen hard. But is now the time to buy?
Investment trusts

Scottish Mortgage Investment Trust has fallen hard. But is now the time to buy?

After a spectacular couple of decades, the Scottish Mortgage Investment Trust has fallen by almost 45% so far this year. Rupert Hargreaves asks if no…
26 May 2022
The world’s hottest housing markets are faltering – is the UK next?
House prices

The world’s hottest housing markets are faltering – is the UK next?

As interest rates rise, house prices in the world’s most overpriced markets are starting to fall. The UK’s turn will come, says John Stepek. But will …
23 May 2022
Is it time to pick up growth stock bargains yet?
Investment strategy

Is it time to pick up growth stock bargains yet?

If you’re thinking of picking up some bargains from the tech stock crash, beware – there are still plenty of “growth traps” out there. John Stepek exp…
26 May 2022