JPMorgan upgrades Derwent and GPE, downgrades Landsec

JPMorgan Cazenove upgraded Great Portland Estates and Derwent London on Wednesday, but downgraded Landsec as it took a look at London office space.

"Shorter office leases, the rise of flexible space and pressure from all stakeholders embracing ESG values are driving structural change in London office markets," JPM said.

"More tenants will be free to move offices each year, and more will be looking to do so as firms seek to maximise productivity, pull workers back to the office and deliver on ESG ambitions."

It sees active demand for prime office space growing by 38% to 2030, with a supply crunch from 2023 and increasing barriers to developing new space. By 2025, JPM estimates that demand for London prime office space could be 1.8x available supply, which will drive strong structural rental growth.

The bank said it sees GPE and Derwent as strongly positioned to benefit from these trends and upgraded both to ‘overweight’ from ‘neutral’. However, it sees limited upside for Landsec, which it downgraded to ‘neutral’ form ‘overweight’.

It maintained an ‘overweight’ rating on British Land and Helical.