MS expects euro zone offices to lag wider property sector recovery

Covivio SA

03/12/2024 08:49

** Morgan Stanley expects office rental growth to slow down
in most euro zone markets and cuts its assumptions for the
metric in Germany and France due to macroeconomic concerns
    ** It rates the overall property sector as "attractive", but
is more cautious on offices in continental Europe
    ** "Asset values will have to grow into book valuations,
which have not been marked to market in full," it says
    ** MS adds the office sector's higher debt levels limit
companies' ability to deploy capital into growth initiatives
    ** It downgrades Covivio  CVO.PA  to "underweight" from
"equal-weight" and maintains Gecina  GFCP.PA  at "underweight",
saying it expects them to lag sector recovery
    ** It notes Covivio is rotating its portfolio from offices
into hotels, but this will take time as it will need to dispose
assets to fund the shift
    ** Twelve out of 14 analysts rate Covivio "strong
buy"/"buy", with ​one at "hold" and one at "sell" - LSEG
    ** Icade  ICAD.PA  ("overweight") meanwhile offers the
deepest value in MS's coverage, with healthcare portfolio
disposals expected to be completed by 2026, the broker says

 (Reporting by Hugo Lhomedet)
 ((Hugo.lhomedet@thomsonreuters.com))