Hello. Europe’s office market faces the toughest conditions since the financial crisis, experts have warned, as rising interest rates and soaring construction costs threaten to stifle its recovery from the coronavirus pandemic.
Rising interest rates and tighter financial conditions have pushed office owners’ debt servicing costs above their rental income for the first time since 2007, according to analysis by Bank of America.
This is already chilling investment in the sector and could cause difficulties for highly indebted office companies.
Rising base rates have increased homeowners’ debt servicing costs. But that’s just the tip of the iceberg, according to Marc Mozzi, BofA real estate analyst:
“When you talk about interest rates, that’s only about a quarter of the cost of borrowing for European property companies”
Credit spreads, a measure of how much extra a company has to pay to borrow compared to a sovereign issuer, have doubled for UK-listed property companies and almost tripled for European groups over the past year. , indicating that bond investors are increasingly worried about corporate solvency.
Happy Monday and thank you for reading FirstFT Europe/Africa. We wish you a great week – Jennifer
Five other stories in the news
1. Battle lines drawn during the search of Donald Trump’s home US lawmakers have demanded more information about the potential national security threat posed by the trove of classified documents found at Mar-a-Lago during the FBI’s search of the former president’s home. Trump is under investigation for serious violations of the National Defense Act, mishandling of government material and obstruction of justice.
2. The Saudi prince made a $500 million bet on Russia Kingdom Holding, one of Saudi Arabia’s most prominent investors, majority-owned by Prince Alwaleed bin Talal, revealed yesterday that it poured hundreds of millions of dollars into Russian energy companies shortly before and after the invasion of Ukraine.
3. EU calls for an end to Balkan war talks The tension between Serbia and Kosovo has turned into violent protests and border unrest, with Serbian President Aleksandar Vučić warning that the unrest is “one step away from disaster”. The EU and NATO are preparing to hold crisis talks in Brussels this week.
4. Germany must reduce its gas consumption by 20% to avoid winter rationing Businesses and households are bracing for Europe’s biggest energy crisis in a generation, with Germany’s main grid regulator warning that gas consumption must be cut by a fifth to avoid a crippling shortage after Russia’s Gazprom limited its supplies in mid-June.
5. DR Congo opens energy auction to carbon credit and crypto groups The Democratic Republic of Congo will allow carbon credit and cryptocurrency firms to bid under an oil and gas licensing round that has been criticized by environmentalists, who said drilling in rainforests and peatlands could release large amounts of carbon dioxide.
The day ahead
Strikes in the UK Industrial action by criminal lawyers in England and Wales, who went on strike over legal aid funding, continues today. More than 500 Unite members at Liverpool container ports will close their ballot for leaving a dispute over pay and conditions.
One year of the Taliban in Afghanistan It is the first anniversary of the resumption of control of Afghanistan by the Islamist group. The FT has published a series on how society and the economy have changed since then.
Economic data Nigeria releases monthly inflation data after rate of rise in prices and goods hits peak the highest level in five and a half years in June. US Federal Reserve Board Member Christopher Waller delivers the keynote address at the 2022 Money, Banking, Payments and Finance Summer Workshop hosted by the central bank. (Bloomberg, FT)
What else we read
Did the UK miss out on the semiconductor boom? At a time of renewed economic nationalism and pandemic-related supply disruption, the global chipmaking industry has been caught in a geopolitical storm. Western countries have responded by boosting domestic manufacturing, but Britain may be too late for the party.
Afghan roads once threatened by the Taliban are now safer – for men After toppling the Western-backed government 12 months ago, insurgents who previously jeopardized travel routes in the country are now largely unchallenged, leading to a marked drop in violence on the roads. But for women, the draconian restrictions have severely curbed travel.
We are getting closer to a world without animal testing Animal experiments have long been the only authorized way to test drug safety, but many treatments that work in mice don’t work well in humans, and vice versa. Scientists are using new technology to grow miniature human organs for more precise, human-like research.
Polio virus reappears in wealthy economies After being nearly eradicated, poliomyelitis appeared in New York, London, Israel and Ukraine. Data from the WHO and Unicef show the biggest sustained decline in childhood vaccinations in three decades, raising fears that vaccine hesitancy and global conflict could allow the disease to make a comeback .
The Arctic is warming four times faster than the rest of the planet: study Scientists have long known that the Arctic is warming faster than the rest of the planet, but have not agreed on a rate. The warming effect and the long-term decline of sea ice are considered two main indicators of climate change.
Rising interest rates, runaway inflation and supply chain disruptions: the 15 stocks shortlisted for this year’s Financial Times Business Book of the Year shed light on some of the most pressing trade issues.