Brexit uncertainty may hit London office market

Euro and Pound banknotes are seen in front of BREXIT letters in this photo illustration taken on April 28, 2017. (REUTERS)
Updated 19 May 2017

Brexit uncertainty may hit London office market

LONDON: Britain’s largest listed property developer Land Securities warned that Brexit had created business uncertainty in the London office market, leading to falls in demand, rental values and construction commitments.
The developer behind London’s “Walkie Talkie” skyscraper reported a 1.2 percent fall in adjusted diluted net asset value (NAV) — a measure of a developer’s buildings — to 1,417 pence for the year to March 31.
Analysts on average had expected adjusted NAV of 1,372 pence, according to a company-supplied consensus.
“We won’t be sure of the long-term effect of Brexit on our markets for some time....We are taking this time to prepare the business for the opportunities and challenges we see ahead,” Chief Executive Robert Noel said in a statement.
Among the FTSE-100 commercial developers, Land Securities has the largest exposure to UK offices, which could feel an impact as financial firms are considering moving some work out of Britain due to Brexit.
The company said rental values in the London office market were unlikely to grow, unless there was more certainty on the free movement of people and Britain’s terms of trade with the EU.
Land Securities had entered the downturn with limited exposure to development projects that were proceeding without tenants, longer-than-industry average lease lengths on its properties and high occupancy.
On Wednesday, peer British Land forecast persisting uncertainty in the British property market for some considerable time as Brexit talks proceed, even as it noted that London office customers were taking longer to make decisions on moves.
Land Securities said on Thursday it had just 283,000 square feet of available office space developed to let, after turning cautious on speculative development in 2015.
It could decide to exploit 1.4 million square feet of future development opportunities, when the time was right, it added.
In comparison, British Land stayed bullish on such construction for longer and exposure to such projects without tenant releases stands at below 4 percent, but is still worth about £1.7 billion.

Saudi stocks receive landmark emerging markets upgrade from MSCI

Updated 21 June 2018

Saudi stocks receive landmark emerging markets upgrade from MSCI

  • Market authorities in Saudi Arabia have introduced a series of reforms in the past 18 months
  • MSCI’s Emerging Market index is tracked by about $2 trillion in active and global funds

LONDON: Saudi Arabian equites are poised to attract up to $40 billion worth of foreign inflows, following a landmark decision by index provider MSCI to include the Kingdom’s stocks in its widely tracked Emerging Markets index.

"MSCI will include the MSCI Saudi Arabia Index in the MSCI Emerging Markets Index, representing on a pro forma basis a weight of approximately 2.6% of the index with 32 securities, following a two-step inclusion process," the MSCI said in a statement late on Wednesday night Riyadh time.

“Saudi Arabia’s inclusion in MSCI’s EM Index is a milestone achievement and will likely bring with it significant levels of foreign investment,” Salah Shamma, head of investment for MENA at Franklin Templeton Emerging Markets Equity, told Arab News. 

“It is a recognition of the progress Saudi Arabia has made in implementing its ambitious capital markets transformation agenda. The halo effect of such a move will be felt across the stock exchanges of the entire Gulf Cooperation Council (GCC).”

Market authorities in Saudi Arabia have introduced a series of reforms in the past 18 months to bring local capital markets more in line with international norms, including lower restrictions on international investors, and the introduction of short-selling and T+2 settlement cycles.

Such reforms prompted index provider FTSE Russell to upgrade the Kingdom to emerging market status in March, opening the country’s stocks up to billions worth of passive and active inflows from foreign investors.

MSCI’s Emerging Market index is tracked by about $2 trillion in active and global funds. The inclusion of Saudi stocks in the index, alongside FTSE Russell’s upgrade, is forecast to attract as much as $45 billion of foreign inflows from passive and active investors, according to estimates from Egyptian investment bank EFG Hermes. 

The upgrade announcement was widely expected by the region’s investment community, following a similar emerging markets upgrade announcement by fellow index provider FTSE Russell in March. 

“MSCI index inclusion will be a historic milestone for the Saudi market as it will allow for sticky institutional money to make an entry in 2019 which will help deepen the market,” said John Sfakianakis, director of economic research at the Gulf Research Center in Riyadh.