Property & Construction Daily

The Property & Construction Daily provides a sector-specific comment from leading analyst Alastair Stewart. His daily perspective provides a round-up of market statements, news, economics and views from the property and construction sectors.

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November 20, 2023

AHT | Economics – London office starts hit record high | Fortnight ahead

Company news

Ashtead Group (AHT, 5,244p, £22,957m mkt cap)

US-focused plant hire group. HY trading update.

Guidance: “We now expect both Group and US rental revenue growth in the range of 11 – 13% (previous guidance, 13 – 16%), which will result in EBITDA being 2 – 3% below current market expectations. In addition, we now expect a full-year depreciation charge of c. $2,120m and a net interest cost of c. $540m which will result in adjusted profit before tax being below current market expectations”.

Trading: “Despite robust end markets, ongoing structural drivers and a record operating performance, revenue late in the second quarter was affected by lower levels of emergency response activity with a significantly quieter hurricane season than seen in recent years and fewer naturally occurring events, such as wildfires, with this effect continuing into the third quarter. In addition, the writers’ and actors’ strikes have persisted for longer than anticipated with some impact on the rest of the Canadian, US and UK businesses that rent into that space. This has also continued into third quarter”.

Outlook: “Despite these one-off events impacting the current financial year, our end markets in North America remain robust, supported in the US by an increasing number of mega projects and recent legislative acts. This, combined with the substantial structural growth opportunities that we see for the business, enables the Board to look to the future with confidence”. HY results, 5 December.

Economic data

Office construction starts in London over the past six months hit the highest level since Deloitte started tracking the sector in 2005. The winter 2023 edition of the twice-yearly London Office Crane Survey from Deloitte shows a total of 5.1 million sq ft of offices starting across 43 projects, 16% higher than in the summer edition. Of the total, 1.8 million sq ft was made up of nine new build starts (up 38% since the summer survey, 13 projects) and 3.3 million refurbishments in 34 projects (+3%, 37). The average size of new build starts more than doubled to c. 203,000 sq ft compared with c. 93,000 sq ft in the previous edition, with the largest being British Land’s 685,000 sq ft 2 Finsbury Avenue and GPE’s 322,000 sq ft 2 Aldermanbury Square schemes. The City was the largest of the seven London areas, with 2.4 million sq ft started. The drive to net zero was a key driver of the trend; a majority of the developers anticipate that they will achieve operational net zero across their portfolio by 2040, with green lease clauses are becoming increasingly widely adopted.

Volume and number of new starts

Fortnight ahead

Big event this week is the Chancellor’s Autumn Statement on Wednesday, with media speculation mounting that there could be a range of tax cuts, with different outlets pointing to corporate, personal or both.

231120 Fortnight ahead
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