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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January 19, 2024

FERG, CREI, API | Economic research – 5,000 agent branches closed in 2023; Logistics outlook strong despite rising vacancy rates | Fortnight ahead

Company news

Ferguson (FERG, 14,920p, £30,313m)

Now entirely North American-focused building materials distributor, formerly Wolseley. New corporate structure to achieve US domicile. Following the 5 December announcement that the group was considering a new corporate structure to domicile its ultimate parent company in the United States, the Board has concluded that it would be in the best interests of the Company and its shareholders as a whole to proceed with establishing a new corporate structure. The new corporate structure would be accomplished through a merger process by which the Company would become a direct wholly owned subsidiary of a new Delaware corporation (US TopCo). This would list its common stock on both the New York Stock Exchange (primary) and London Stock Exchange (secondary). Shareholders would receive one new US TopCo share for each Company share held as of the business day preceding the transaction effective date. No additional equity would be raised by US TopCo as part of the transaction. Timetable: mid/late April, Proxy Statement; late May 2021,  Special meeting of shareholders held in London; 1 August 1, Effective date of the transaction; Company shares exchanged for US TopCo shares; US TopCo shares to begin trading on the NYSE and LSE.

Custodian Property Income REIT (CREI, 80p, £351m)

UK commercial real estate investment trust. Recommended all share merger. CREI intends to acquire the entire issued and to be issued share capital of abrdn Property Income Trust (API, 48p, £183m) by means of a Court-sanctioned scheme of arrangement. Under the terms of the merger, API shareholders will receive for each share, 0.78 new CREI shares, valuing API shares at 62.1p, a 29% premium to yesterday’s closing price. Following completion, existing CREI and API shareholders will hold c. 59.7% and API 40.3% respectively in the combined CREI Group. The two boards believe that the merger would “bring together two complementary portfolios to create a differentiated REIT with enhanced diversification and share liquidity and a fully covered and sustainable dividend for the combined group’s shareholders” and offer a stronger balance sheet and material cost savings.

Economic research


Housing market. Almost 5,000 estate and lettings agents closed in 2023, according to a wide ranging Property & Homemover Q4 2023 Report from TwentyCi, which also tracks volume and price trends across the sales and rental markets. The market intelligence group recorded 2,893 closures of sales offices and 1,906 lettings branches, although openings brought the net decline to 1,154 and 659 respectively, with estate agents facing lower sales rates. Meanwhile, the market share of this shrinking sales market taken by online or ‘hybrid’ agents fell to 5.5%, from 6.9% in 2022 and a high of 8.2% in 2019. The report’s market analysis showed that new instructions rose 2% to 1.570 million, but total sales agreed fell by 12% to 1.064 million (-2%, Scotland; -16%, outer London).  However, the report anticipates an improvement throughout 2024. There was a 63% increase to 0.990 million in sales where the vendor’s price was changed and a 35% increase to 0.737 million in sales withdrawn. Time to sell rose to 62 days in 2023, although this still stood at 18% lower than pre-pandemic norms, while time to complete stands at 123 days. The average asking price rose by 1.7% to £429k, mainly reflecting mix; the average price achieved was 96.9% of asking price (105.9%, Scotland, reflecting the ‘missives’ system; 94.6% London), down from 99.4% in 2023. Shortages in rental properties (albeit with a small improvement in Q4) continued, with averaging asking rents rising 8.1% to £1,800 per month.

Estate Agency branches

Logistics. Savills’ closely-watched Big Shed Briefing, shows a 40% Y/Y fall in take-up to 29.1 million sq ft, but still 12% above the pre-Covid average (below, left). Meanwhile, supply is up, raising vacancy rates (below, right). However, the long-term outlook for the sector remains positive, despite short-term uncertainty, the report concludes: “We expect online retail, a key driver behind logistics demand, to keep growing, with online retail penetration forecast to increase by 7% year on year, reaching 28.4% by 2027. This growth should equate to additional logistics demand of up to 48m sq ft over the period. However, the picture will not be uniform, and the biggest risk on Outlook the supply side will be whether we witness a further wave of occupier-controlled space coming to the market or, worse still, company failure that results in the return of secondhand space”.

PandC Daily AgentsFortnight ahead
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