Focusing more on rent growth less on LTV; add Entra (Buy) to CL
Stronger continental office market rents, ahead of GDP growth
Prime office market rent growth was 7% for eight leading Euro area cities in 2016, a level not seen since 2007 and ahead of that implied by real GDP growth. The gap vs. GDP growth was even greater in Stockholm and Oslo, illustrating the benefits of urbanization, limited new supply, conversions to residential and more office tenants increasingly focused on finding the right space. London, for various reasons, has seen the opposite trends.
We make seven rating changes, including three new Buy ratings
We upgrade Castellum to Buy (from Neutral) consistent with its exposure to Swedish offices and an above average LTV. Above average LTVs vs. lower risk assets drives our upgrade of LEG (to Buy from Neutral) and Vonovia (from Sell to Neutral) and our downgrade of Shaftesbury (to Sell from Neutral). Share price performance also plays a role in upgrading particularly Intu to Buy (from Neutral) but also Eurocommercial to Neutral (from Sell) and downgrading Gecina to Neutral (from Buy).