Speaker 1: This is Bloomberg Intelligence. We're really getting into that the
Speaker 1: streaming's arm three additions, looking at that and saying we
Speaker 1: can really build a nice niche for ourselves in depth
Speaker 1: research and data on two thousand companies and dirty industry.
Speaker 1: The dollar is the dominant concept in the planet. I
Speaker 1: think the opposition is not turning progression of what Microsoft
Speaker 1: can do with this technology. Going forward, Bloomberg Intelligence with
Speaker 1: Alex Steel and Paul Sweeney on Bloomberg Radio. Over the
Speaker 1: next hour, we're going to dig inside the big business
Speaker 1: stories impacting Wall Street and the global markets. Each and
Speaker 1: every week we provide in depth research and data on
Speaker 1: some of the two thousand companies and industries are analysts
Speaker 1: cover worldwide. Today, we're going to take a look at
Speaker 1: the revenue recovery for MGM resorts, plus the UK residential
Speaker 1: renovation gets a boost from the housing hot streak. But first,
Speaker 1: let's talk about travel. Are you going anywhere for the
Speaker 1: rest of the summer, Are you making any plans for
Speaker 1: the winter, and what does that mean for the airline stocks,
Speaker 1: hotel stocks, the whole thing to any us now. Bloomberg
Speaker 1: Intelligence Senior Airlines analyst George Ferguson George this past week,
Speaker 1: in a surprise move, the EU didn't stop US citizens
Speaker 1: from coming into the EU and be able to vacation
Speaker 1: that they're going to reevaluate in the next two weeks.
Speaker 1: What's intercontinental travel like right now? So I think that
Speaker 1: was one of the few good news points on trans
Speaker 1: atlantic travel. So trans atlantic travel is I would say,
Speaker 1: a hodgepodge of requirements and regulations right now. The most
Speaker 1: besuttling to me, I think, is that the US has
Speaker 1: excluded a lot of our key partners from Europe, the Germans,
Speaker 1: the you know, the English and such, from even coming
Speaker 1: here quarantine or not, um, you know, But we can
Speaker 1: go there to some of the countries and some of
Speaker 1: them we have to quarantine. Some not usual in the
Speaker 1: southern hemisphere, the ones that like and need travel the
Speaker 1: most have the least restrictions. But we're starting to see,
Speaker 1: you know, a major spike in some of the some
Speaker 1: of the virus activity down there. So it makes me
Speaker 1: wonder how long that's gonna last, or how long US
Speaker 1: travel is going to want to go there. So I
Speaker 1: just call it a ridiculous hodgepod right now, really hard
Speaker 1: to figure out, very country dependent. Where are we just
Speaker 1: in U S domestic uh capacity right now Georgia, it
Speaker 1: seems like there's more planes on the ground and in
Speaker 1: the air. Where are we in terms of that capacity? Yeah,
Speaker 1: so US capacity as you know, as we sort of
Speaker 1: near the end of the summer travel season. Uh, you know,
Speaker 1: some of the low cost carriers are even flying more
Speaker 1: than they did in twenty Lots of carriers are I
Speaker 1: would say, within ten or fifteen percent of of levels UM.
Speaker 1: And this is just on leisure travel. So I'd say
Speaker 1: from a leisure travel perspective, from what we've heard from
Speaker 1: a lot of them is that they're back to level.
Speaker 1: So it's been quite a nice bounce back on leisure
Speaker 1: in the US and the domestic market. Does that hold
Speaker 1: up with Delta so well? I think there's a couple
Speaker 1: of problems. I think Delta is a bit of a problem. UM.
Speaker 1: I seem to think we're not going to ever go
Speaker 1: back to the lockdowns that we saw. I think we
Speaker 1: understand the virus too much. There's some people that just
Speaker 1: won't I think, you know, refrain as much as they
Speaker 1: would maybe last March when they didn't understand what was
Speaker 1: at risk. UM. So I think Delta does take some
Speaker 1: demand off the table. But I think more importantly is
Speaker 1: the business travel right. I think the leisures closing, by
Speaker 1: the heavy leisure seasons closing, kids are going back to school.
Speaker 1: It's going to make it harder for mom and dad
Speaker 1: to get away with the kids. If you don't have kids,
Speaker 1: that just you know, it's it's it's easier. And companies
Speaker 1: though starting to push back that return to office. I
Speaker 1: think employees need to be back in the office before
Speaker 1: the companies really flesh out what travel policies are going
Speaker 1: to be. And so I think without that sort of
Speaker 1: return to office or pushing it back, I think we're
Speaker 1: not going to see that business travel for longer. And
Speaker 1: I think that really hurts the fall season and winter
Speaker 1: season this year because of that. And I think and
Speaker 1: Delta has an effect on that. And we're talking about
Speaker 1: the Delta variant, not Delta airline point airline conversation. I'm
Speaker 1: sure that folks Delta appreciate clarifying that. George, all right,
Speaker 1: So it's it's interesting people were hoping by this time
Speaker 1: we'd have, you know, more vibrant trans atlantic I'm more
Speaker 1: vibrant maybe intercontinental European travel, but this delta variant has
Speaker 1: really put a wrinkle in that. Are the airlines Are
Speaker 1: they preparing for a slower than expected kind of third
Speaker 1: and fourth quarter? Are they guiding down? So uh, as
Speaker 1: of right now, we don't see that. We've just finished
Speaker 1: earning season. Um you know, most of them were pretty
Speaker 1: upbeat on booking trends. They were, I mean, there were
Speaker 1: some of them that would readily admit that business travel
Speaker 1: is a is a short booking window, um you know,
Speaker 1: meaning business travels usually book within a couple of weeks.
Speaker 1: And so they said they look at we don't we
Speaker 1: don't have a sense for where businesses going, and we
Speaker 1: do see a taper in leisure. But most of them,
Speaker 1: we're pretty upbeat. So I don't see them guiding yet,
Speaker 1: but we'll be. We're watching closely. Right now. There are
Speaker 1: enough flight attendants and pilots to do stuff. There are
Speaker 1: challenges with labor Like everywhere else in the economy, pilots
Speaker 1: are pilots are very I don't know what the right
Speaker 1: there may be sticky, you know sort of labor force
Speaker 1: because they've got such a specialized skill set, and the
Speaker 1: challenge there is more getting them trained and having them
Speaker 1: current to fly the equipment that you've got at the
Speaker 1: airline at this point, right, And some airlines cut part
Speaker 1: of the fleet, so they might not need pilots that
Speaker 1: fly X y Z, but they need flots pilots of
Speaker 1: fly pdqes and so they got to get them trained
Speaker 1: and move them to move them to what they have
Speaker 1: in the fleet. Others haven't been flying for a while.
Speaker 1: That's a little bit of a challenge. That's a challenge
Speaker 1: for the for the full service carriers, you know, the
Speaker 1: United the Deltas, the American um. The low cost guys,
Speaker 1: they're having a problem because I think they're trying to
Speaker 1: take a lot of market share here and we're seeing
Speaker 1: companies like Spirit, I think, really push the amount of
Speaker 1: capacity they put in the marketplace without having the appropriate
Speaker 1: levels of reserve airplanes and other um, you know, on
Speaker 1: pilots that aren't that are in reserve ready to meet
Speaker 1: you know, the need if they have a weather event
Speaker 1: or something like that. And that's hurt that we've seen
Speaker 1: that recently. So I think the low cost guys are
Speaker 1: pushing it. The full service guys do have a genuine
Speaker 1: sort of training problem. Okay, George, thank you very much.
Speaker 1: George ferguson Bloomberg Intelligence, senior Airlines analyst. All right, coming
Speaker 1: up on the program, we look at which mining and
Speaker 1: metals companies are best positioned for the transition to a
Speaker 1: low carbon world. You're listening to Bloomberg Intelligence on Bloomberg Radio,
Speaker 1: providing in depth research and data on two thousand companies
Speaker 1: and a hundred and thirty industries. You can access Bloomberg
Speaker 1: Intelligence through the I go on the terminal, I'm Alex
Speaker 1: Steel and on Paul Sweeney. It's thirteen minutes past the hour,
Speaker 1: and this is Bloomberg. This is Bloomberg Intelligence with Alex
Speaker 1: Steel and Paul Sweeney on Bloomberg Radio. Well, we spend
Speaker 1: a lot of time on this program talking about the
Speaker 1: s G investing environmental social governance. It's growing in popularity.
Speaker 1: This time we want to take a look at how
Speaker 1: the metals and mining industry fairs under this analysis. For
Speaker 1: that we welcome Bloomberg Intelligence E s G analysts, Shaheen
Speaker 1: contractor just at first blush Shine. It would seem to
Speaker 1: me the medals of mining companies might not score very
Speaker 1: well on E s G. Is that a is that
Speaker 1: a poor bias on my part? So I think medals
Speaker 1: and minings have always been sort of the traditional discycling
Speaker 1: in gas, but the traditional folk surface not flat. But
Speaker 1: I think the benefit of that is they picked up
Speaker 1: the game fairly early on in the process. And I
Speaker 1: think we're seeing a number of minors that have ramp up.
Speaker 1: A number of them have set these gobbon reduction goals
Speaker 1: of the last euros, so I would say, probably something
Speaker 1: I haven't seen before. So you kind of ranked them light, right,
Speaker 1: So you go over forty six metal and mining companies
Speaker 1: before we get into like who scored well and who didn't.
Speaker 1: What were your criteria, because a lot of times you
Speaker 1: I feel like companies say one thing and do another.
Speaker 1: But even more importantly they say like carbon intensity versus
Speaker 1: you know, versus my own operations, and and those make
Speaker 1: a difference and how you measure it absolutely, And so
Speaker 1: our ranking is really looking at these carbon reduction goals.
Speaker 1: So these are bi common schools, And what we're really
Speaker 1: doing is we're starting companies on two pillars. So one
Speaker 1: is a historic pillar which looks that sort of reduction
Speaker 1: trend over five years and along with the current intensity,
Speaker 1: and the second is more sort of forward looking at
Speaker 1: we're here we're quantifying these forward looking reduction goals and
Speaker 1: really comparing it to a temperature aligned benchmark. So the
Speaker 1: end of the day, we're just saying, you know, who's
Speaker 1: aligned with the Paris goals, who's ambitious enough. UM to
Speaker 1: your point, of course, they're They're tricky, which is why
Speaker 1: we've come up with this standardized way of the things.
Speaker 1: So there's three ways to kind of measure stuff. Like
Speaker 1: one is Scope one and two, which are basically the
Speaker 1: carbon reduction using your own power, so you're using less. Uh.
Speaker 1: The other is the types of energy that you're using,
Speaker 1: so instead of using coal, maybe you use solar. And
Speaker 1: then the other is the products that you produce and
Speaker 1: cutting that or any of these guys tackling Scope three
Speaker 1: because in the oil community, Scope three is so hard
Speaker 1: to do because it's basically trying to tackle emissions and
Speaker 1: like jet fuel and what you're driving in your car.
Speaker 1: Yeah yeah, UM. I think Scope three for things like
Speaker 1: oil and gas is the elephant in the room. I
Speaker 1: think if you go beyond that to other sectors, it
Speaker 1: isn't so much of a focus. I think the one
Speaker 1: company that comes to my mind that is tackling scope
Speaker 1: three is UM if I remember right, it's mim um.
Speaker 1: But again other than that, it's largely just operation emissions
Speaker 1: because I think if you you know, you have transportation
Speaker 1: will in gas. That's really were Scope three is the
Speaker 1: elephant in the room. Well it comes to metals and mining,
Speaker 1: but not that yet, so shooking for metals and mining company,
Speaker 1: what do they actually do to improve their E s
Speaker 1: G kind of footprint if you will? Sure so you
Speaker 1: know for for it really depends on the metal produced,
Speaker 1: and it's just so diversified. Giving the example of aluminium,
Speaker 1: so aluminium is again just one of the most common
Speaker 1: intensive industries, and over there it's things like increasing scrap
Speaker 1: based production, which is much less common intensive, and also
Speaker 1: decomganizing the power sector for example, because aluminium just uses
Speaker 1: a lot of electricity. But it varies very different metals.
Speaker 1: But where he is literally from company to company, mind
Speaker 1: to mind. But to that point, and take a look
Speaker 1: at the carbon scores that are the worst and that's
Speaker 1: gonna Rio and Glencore is that is a thing u
Speaker 1: so real Dento has a fair amount of operations and
Speaker 1: aluminum and just the way the score is design aluminum
Speaker 1: being so common intensive has to reduce submissions by a
Speaker 1: lot more than other diversified minors. So by before they
Speaker 1: automatically tend to tend towards the lower end of their
Speaker 1: score of our score card. Again, just because there's so
Speaker 1: much more carbon intensive than any other metal and tend
Speaker 1: to having sort of phenom in that UM would weigh
Speaker 1: down on them just like any other company. Like you
Speaker 1: will see Hinda Core, you'd see rustles towards the bottom.
Speaker 1: So shehan, is there any regionality to this? Are our
Speaker 1: European damasile companies do they do better? Because it seems
Speaker 1: to me I have s G concerns or G s
Speaker 1: E s G issues are more pronounced in Europe than
Speaker 1: perhaps or more advanced than they are in the US.
Speaker 1: So do we see that in some of the results,
Speaker 1: in some of the performance of these companies. Suppose you're right,
Speaker 1: I think for most sectors we do see the street
Speaker 1: nudisms where Europe is leading. I think the metics and
Speaker 1: minings I didn't see it just because everything is so
Speaker 1: globally spread like Africa, South South America or theations are
Speaker 1: just diversified. I think the medicine minings, it was more
Speaker 1: by sub industry and what I mean by that is
Speaker 1: base metal companies had far more goals and precious metals again,
Speaker 1: base metal example, aluminum, it's much more common intensive, which
Speaker 1: is why it's more metal for operations again, which is
Speaker 1: why companies are setting these goals. Precious metals not so
Speaker 1: cognit intensive, yes, and a focus less of a priority. Yeah,
Speaker 1: it feels like copper goal kind of get a little
Speaker 1: bit of a easier paths that. Um, they do, and
Speaker 1: they should because it's not that govern intensive. It comes
Speaker 1: down to sort of cause some things like that. Are
Speaker 1: the our investors rewarding these companies for that? So you know,
Speaker 1: that's a great question, and I still have to do
Speaker 1: the analysis for metals, but I can give you what
Speaker 1: I did as an exampt for utilities, where we saw
Speaker 1: that you know, companies with higher bi common scores were
Speaker 1: more likely to be held in any sc fund. So
Speaker 1: clearly e SG investors our prioritizing these I would say
Speaker 1: these issues now, I would wait to see what kind
Speaker 1: of analysis at least to medalsine mining, but um, that's
Speaker 1: what we had for utility, So definitely something prioritized for
Speaker 1: at least the resource in times to enviolently heavy sectors Yeah,
Speaker 1: like metals and mining, I'm just wondering at you know,
Speaker 1: I know this is becoming a bigger and bigger issue
Speaker 1: for managers, for board members, for shareholders, this focus on
Speaker 1: e s g S in addition to you know, the
Speaker 1: income statement and the balance sheet and things like that.
Speaker 1: In the metals and mining space. What's what's the sense
Speaker 1: you get from from management in terms of their commitment UM.
Speaker 1: I think medals and minings is again like an industry
Speaker 1: that's just being early exposed to just because it's amongst
Speaker 1: the resource intensive sectors. I think the one thing I've
Speaker 1: been seeing from metals and mining companies is an increasing
Speaker 1: focus on safety, so things texicality rates, incident rates, and
Speaker 1: I'm seeing an increasing number of companies that sort of
Speaker 1: executive compensation and dial this back to things like safety
Speaker 1: and to some extend also emission. So you know that
Speaker 1: compensation and center gives you a dijected sort of monetary
Speaker 1: bush to do these things. So definitely more of a
Speaker 1: focus from that. Yeah, it's sort of like they had
Speaker 1: to have the right to operate for so long in
Speaker 1: different countries that they couldn't mess it up. UM that
Speaker 1: they already have in some ways better practices um or conditioned.
Speaker 1: I guess all right, she hean thinks a lot, she
Speaker 1: can contractor joining us Bloomberg Intelligence E s G analysts.
Speaker 1: Coming up on the program, we look at the revenue
Speaker 1: recovery for MGM Resorts. You're listening to Bloomberg Intelligence on
Speaker 1: Bloomberg Radio, providing in depth research and data on two
Speaker 1: thousand companies and a hundred and thirty industries. You can
Speaker 1: access Bloomberg Intelligence through b I go, I'm a terminal,
Speaker 1: I'm Alex Steel and Paul Sweeney. It's twenty five minutes
Speaker 1: past the hour, and this is Bloomberg. This is Bloomberg
Speaker 1: Intelligence with Alex Steel and Paul Sweeney on Bloomberg Brady.
Speaker 1: We'll be here each and every week at this time
Speaker 1: tapping into our Bloomberg Intelligence analysts covering some two thousand
Speaker 1: companies and industries worldwide. Well as you wind up having
Speaker 1: a delta variant, we can have it pretty much all
Speaker 1: across the world. How does that affect different sectors? That's
Speaker 1: what we've been working on throughout Bloomberg Intelligence. One particular
Speaker 1: area want to focus on now is the gaming stocks
Speaker 1: like MGM, Las Vegas sands. What's the implication there. So
Speaker 1: let's welcome Bloomberg Intelligence senior Gaming and Lodging analyst Brian Edgar.
Speaker 1: All Right, so delta varians running rampant here, who's getting
Speaker 1: hurt the most? So I think if you look at
Speaker 1: you know, they look at MGM as kind of a
Speaker 1: proxy for the industry, certainly like in the second quarter,
Speaker 1: and thinking about what that means, I would say, you know,
Speaker 1: the cow market in Asia got hit particularly hard where
Speaker 1: we're still at a half of twenty nine teams pre
Speaker 1: pandemic level of gaming activity. Part of that is because
Speaker 1: there was an outbreak in Guangdong Province, which is a
Speaker 1: major feeder market for Macau, and that definitely affected some
Speaker 1: of the traffic in for it. That's been an ongoing
Speaker 1: issue for McCallan could be uh for a while. So
Speaker 1: that resolves when moved to the US. Las Vegas actually
Speaker 1: has been on a bit of an upswing and close
Speaker 1: to her back to pre pandemic levels UH, and it
Speaker 1: benefited when the market went back to full resort documency
Speaker 1: back in June. And yes, the question going forward is
Speaker 1: whether or not um the arrival of the delta variant
Speaker 1: will affect what we expected to happen, which is, you know,
Speaker 1: a big uptick in convention activity as we get to
Speaker 1: the fall months, and that we really have to watch
Speaker 1: and see carefully. So what are the gaming companies in
Speaker 1: the big hotels telling the street about that convention business?
Speaker 1: Because when I think of Vegas again, pretty much every
Speaker 1: time I've been to Vegas, it's been with a convention.
Speaker 1: Um is that business going to come back in this
Speaker 1: year or or is it delta pushing out next year?
Speaker 1: So the bookings and again a lot of this is
Speaker 1: happening as you can understand in real time, but the
Speaker 1: bookings business on the books for a fall and going
Speaker 1: into twenty two have been actually quite strong. The real
Speaker 1: question is as we approached the actual dates, depending on
Speaker 1: how companies adjust their travel UH policies, etcetera, whether or
Speaker 1: not that by the resulting cancelations, but at least the
Speaker 1: book of business going into this period, as of the
Speaker 1: company's most recent comments during the earning season, we're actually
Speaker 1: quite favorable. So that leads to my next question, how
Speaker 1: many how much cancelation can these guys stand given the
Speaker 1: fact that you know that I think the industry has
Speaker 1: weathered being with all casino was shut back in uh
Speaker 1: last March through June and has endured pretty significant capacity invitations.
Speaker 1: Now that the markets back to fulcumancy, I guess you
Speaker 1: could argue that they've been stress tested quite well, notwithstanding
Speaker 1: what might happen with the delta variants. So you know,
Speaker 1: it is an issue. What has happened during the downturn
Speaker 1: is that of laws vecas from knights at a company
Speaker 1: like MGM that we that we would normally be occupied
Speaker 1: by goers has since taken up by casino customers, which
Speaker 1: is the less attractive business. It's lower price, and the
Speaker 1: question is whether or not they have to go back
Speaker 1: to depending on that lower price casino customer, that leisure customer,
Speaker 1: if the convention activity is somehow disrupted. All right, so
Speaker 1: we've done Macaumy, we'll go back there in Vegas. Now,
Speaker 1: how about the regional markets around the country. Um, you
Speaker 1: know they I think they did a little bit better.
Speaker 1: They're less dependent upon that convention business. What's the outlook
Speaker 1: for some of the regional gaming? Regional give me out
Speaker 1: is actually quite strong. I mean when we look at
Speaker 1: MGM in the second quarter and we compare all these
Speaker 1: results to the second quarter of because most of these
Speaker 1: casinos were closed during the second quarter of When we
Speaker 1: look at that, the regional gaming revenue is actually up
Speaker 1: about six percent versus the second quarter of nineteen, which
Speaker 1: is pretty impressive. And not only that, because the companies
Speaker 1: are still operating with significantly scaled back wayburn marketing UH,
Speaker 1: they seem some at least significant margin improvement. So we're
Speaker 1: not only seeing a return to pre pandemic levels of
Speaker 1: revenue in the regional markets, but also very strong margin
Speaker 1: games and even flow through because of the fact that
Speaker 1: the cost base has been um uh paired down so
Speaker 1: significantly during the pandemic. Most other industries are dealing with
Speaker 1: worker shortages, all have input cost increases, wage increases, et cetera. Um,
Speaker 1: how about these guys. Let's I mean, you can go abroad,
Speaker 1: but I was thinking more specifically of the US and like,
Speaker 1: who how what do they do to margins? Like how
Speaker 1: do they pass that on, et cetera. So I think
Speaker 1: what could happen And it's something that companies have mentioned
Speaker 1: is an expense um category that they're watching carefully. Is
Speaker 1: although most of the hotel companies, for example, we follow
Speaker 1: manage and receive revenue or profit based fees as a
Speaker 1: form of compensation uh for managing or franchising those at
Speaker 1: heels UM, you know there is a chance that's the
Speaker 1: so called house profit margins, the margins at the hotel
Speaker 1: owner level could be under some pressure to the extent
Speaker 1: that we see rising waiver costs. Of course, they're going
Speaker 1: into this period just as we said for the CASEDO
Speaker 1: company is having significantly reduced and uh right size their
Speaker 1: their cost structure and the labor structure to accommodate a
Speaker 1: what in many cases has been a smaller audience. So
Speaker 1: as Awkwudcity begins to return UM and as you see
Speaker 1: waiver and staffing levels returned to pre pandemic levels, you
Speaker 1: know this could be a cost issue. We're going to
Speaker 1: have to watch to the extent that waiver accounts for
Speaker 1: such a significant portion of the expense space of both
Speaker 1: hotel companies and casino companies. Great stuff, Brian super appreciate.
Speaker 1: Brian Egger Bloomberg Intelligence, a senior gaming and ladging analyst.
Speaker 1: Coming up on the program, we check in on the
Speaker 1: buoyant UK housing market and look at how hybrid working
Speaker 1: model is impacting European real estate investment trust. You are
Speaker 1: listening to Bloomberg Intelligence on a Bloomberg Radio providing in
Speaker 1: depth research and data on two thousand companies and a
Speaker 1: hundred and thirty industries. You can access Bloomberg Intelligence through
Speaker 1: b I go on the terminal and Alex Steele and
Speaker 1: I'm Paul Sweeney. It's thirty nine minutes past the hour,
Speaker 1: and this is Bloomberg. This is Bloomberg Intelligence with Alex
Speaker 1: Steel and Paul Sweeney on Bloomberg Radio. Mention the health
Speaker 1: of an economy in that it's critical to understand the
Speaker 1: health of its housing market. Let's do that for the UK.
Speaker 1: At one point, housing market was on fire, The rental
Speaker 1: market was on fire, the stocks related to housing building
Speaker 1: construction were on fire. Are they still well? As Shantara Bali,
Speaker 1: senior analyst from Bloomberg Intelligence for Business Services that joins us. Now,
Speaker 1: so just broad stroke, real quick, where's the state of
Speaker 1: the housing market within the UK? Hi? There? Um? Yes,
Speaker 1: So the housing market is still very hot. Actually, um,
Speaker 1: it's continued to grow strongly, sort of rebounding from the pandemic.
Speaker 1: Um and that appears to be underpinned for the next
Speaker 1: I would say, for the next few months. In terms
Speaker 1: of looking at how the data is progressing. So yeah, um,
Speaker 1: still still very hot markets. All right, let's talk about
Speaker 1: the you know, the repair, the maintenance, the improvement of
Speaker 1: existing housing stacks and apartments. I mean that's also a
Speaker 1: hot sector in the U s as people remodel their
Speaker 1: home because they're gonna be like, well, I've been living
Speaker 1: in this thing nonstoff for a couple of years and
Speaker 1: who knows how much longer. So talk to us about
Speaker 1: that type of spending in the UK and maybe how
Speaker 1: some investors are looking for exposure. Yeah. So, um, it's
Speaker 1: I think it's exactly the same trend in the UK.
Speaker 1: So that spend fell off quite strongly at the beginning
Speaker 1: of the pandemic with lockdowns that we had here sort
Speaker 1: of an early but it's come back very very strongly. Um.
Speaker 1: The last data point, which is May that we have
Speaker 1: for UK data is up ninety three, so it is
Speaker 1: a very very strong year over year, but that's part
Speaker 1: of a reflection of last year's weakness. But I think
Speaker 1: you're right in terms of the trend and what what's
Speaker 1: driving that. Partly there's pent up demand from that lost
Speaker 1: a couple of months from the lockdown last year. Partly
Speaker 1: there's underlying strength in this kind of product given we're
Speaker 1: in a pandemic and people are spending more time at
Speaker 1: home and they want to make their homes better. Plus
Speaker 1: the fact people are not paid taking paid vacations abroad
Speaker 1: as much as they would normally do, so they have
Speaker 1: more money to plow into their houses. And then the
Speaker 1: final point, as we all leaded to earlier, that when
Speaker 1: the housing market is strong, this is also good for
Speaker 1: repair and modeling because the data shows over time that
Speaker 1: most people spend on their houses when they've just moved.
Speaker 1: So all of those things of all moving in the
Speaker 1: right direction currently. I so well know that from moving
Speaker 1: during the pandemic as well. Um, what stocks are most
Speaker 1: exposed and what's prized into that? So the company's I
Speaker 1: look at which are exposed to this space. Travis Perkins
Speaker 1: which is the UK's biggest building material distributor, Grasston which
Speaker 1: is also in the similar market. Um. And then finally
Speaker 1: and Howden Joinery which is the the UK's biggest kitchen
Speaker 1: sitting company. So these companies are sort of linked into
Speaker 1: into this trend. Um they I would say they've recovered
Speaker 1: very well in terms of share price. A year. Today
Speaker 1: they've outperformed the general market by something like um and
Speaker 1: it's been mirroring the sort of the underlying data they've
Speaker 1: been raising guidance, et cetera. So I think a strong
Speaker 1: recovery is priced in um in terms of what's happened
Speaker 1: to the share prices. But from here it looks like
Speaker 1: momentum from an earnings perspective is still pretty good. Um,
Speaker 1: there's no reason to sort of be nervous about sort
Speaker 1: of the growth of renovation data or repair data, etcetera.
Speaker 1: So that there they performed very well, but there's still
Speaker 1: a more momentum to come. It seems. Yeah, that's kind
Speaker 1: of where I wanted to go, because I think a
Speaker 1: lot of people here in the States they're saying, we
Speaker 1: do have a housing boom here, low mortgage rates, people
Speaker 1: you know, moving out and wanting more space, and understanding
Speaker 1: that that's similar in the UK. The real question though,
Speaker 1: is how long does it last? When are people are
Speaker 1: going to be like, wait a minute, I don't want
Speaker 1: to live in the middle of nowhere. I are in
Speaker 1: the burbs. I want to be back in the city.
Speaker 1: What are some of your companies saying about that? So
Speaker 1: I think It's a very good question because I think
Speaker 1: in the short in the short term, everyone is so
Speaker 1: has been focused on their cash flow and now the
Speaker 1: rebound that's coming through, so it's kind of sort of
Speaker 1: getting their business back on track in terms of opening
Speaker 1: their outlets or paying dividends, and someone say it's very
Speaker 1: it's still very much about that. But I think the
Speaker 1: key risk, as you highlighted in the question, is how
Speaker 1: how transient is this. Is this something that can last
Speaker 1: over the medium term or is there something very much
Speaker 1: just just gonna last while the pandemic is kind of
Speaker 1: playing through as it were, So once we all return
Speaker 1: to officers and so on over over time with vaccines
Speaker 1: and so one, does that then lead to us sort
Speaker 1: of fall off in UM in this kind of demand
Speaker 1: that we're seeing. I think the other thing I would
Speaker 1: add to that is that house prices have been very
Speaker 1: strong here in the UK, so UM there's a risk
Speaker 1: that there may be too strong to support a longer
Speaker 1: term recovery. So there's a there's a risk that maybe
Speaker 1: things have got a bit too expensive and that could
Speaker 1: stall any eventual recovery. But we're not there yet, and
Speaker 1: in the short term, it seems like everything is moving
Speaker 1: in the right direction, but there is that question mark
Speaker 1: over the medium term. Thank you so much for Intelligence
Speaker 1: Business Services analyst as Shantara Bali. Let's turn into the
Speaker 1: world of reats and the impact of a hybrid work world.
Speaker 1: The question is on the other side of this pandemic,
Speaker 1: in a delta world, what will the work living at
Speaker 1: home type of dynamic look like and what does that
Speaker 1: mean for commercial real estate from where we welcome Sue
Speaker 1: moundon Bloomberg Intelligence senior property analysts. So, so, what are
Speaker 1: the companies saying here as we try on a global
Speaker 1: scale to reopen, Well, there's they're saying at the moment that, um,
Speaker 1: their tenants are really just refurbishing their space to try
Speaker 1: and hope with more meeting rooms, UM, more space to
Speaker 1: be able to have zoom calls UM and less space
Speaker 1: per desks UM. And they're busy doing that at the moment,
Speaker 1: but not really reducing their space requirements too much. I
Speaker 1: do think those are over the course of the next
Speaker 1: eighteen months, maybe two years, as we all come back
Speaker 1: to work and we all settle down to a more
Speaker 1: hybrid pattern, that then maybe some more profound impacts on
Speaker 1: the space that we're using and what the tenants really
Speaker 1: want to that point, before we get to like what
Speaker 1: they may want, I guess the question is when do
Speaker 1: they make that decision because with so much uncertainty, like
Speaker 1: our our leases up at a certain point, does something
Speaker 1: have to be locked in, like what's the time frame
Speaker 1: for that? Yeah, so the s leases are important in
Speaker 1: the UK. They can be quite long. In the continent
Speaker 1: there maybe three years or nine years altogether, but with
Speaker 1: three or six year breaks UM. So it does vary
Speaker 1: enormously what the lease lengths are UM two. But also
Speaker 1: that the thing is that, um the cost of UM
Speaker 1: your office is quite low in comparison with the cost
Speaker 1: of your staff, for example, and so it's probably not
Speaker 1: the immediate priority. All the occupiers are saying they want
Speaker 1: to be able to attract talent so they into good
Speaker 1: place for their you know, their staff to go. But
Speaker 1: at the same time, you know, if they wanted to
Speaker 1: cut their costs by they could sub let a very
Speaker 1: small portion of their property. So that's a decision that
Speaker 1: will come further down the line in the you know,
Speaker 1: working through how we deal with a hybrid environment, hybrid
Speaker 1: working environment. So the last time I was in London
Speaker 1: and Middaly was two years ago. Now. Um, I was
Speaker 1: just amazed that despite Brexit, in all the doom and gloom,
Speaker 1: all you could see around the city of London was
Speaker 1: cranes building new structures in the city of London. Outside
Speaker 1: the city of London. What's the London real estate market
Speaker 1: like these days? So actually, for officers, the supply of
Speaker 1: officers isn't that huge. I know, we had Brexit, um
Speaker 1: and you know then we have a pandemic, and so
Speaker 1: construction has slowed down a lot. For officers. There's a
Speaker 1: lot of home building going on, and I actually believe that, um,
Speaker 1: you know, they're the sort of problems that we're facing
Speaker 1: here is that to come in UM that all the
Speaker 1: officers have to be UM what we call EPC compliant,
Speaker 1: which means that they have to be a l B
Speaker 1: ranked for climate change in their emissions and the energy
Speaker 1: that they consume. And not much of the London stock
Speaker 1: actually compliance with that at the moment. So there is
Speaker 1: a big concern amongst the community office community as to
Speaker 1: how much money they're going to have to spend to
Speaker 1: get their offices to that state. And I think what
Speaker 1: that's going to drive one of the reasons that there
Speaker 1: are others as well, will drive a lot of the
Speaker 1: these sort of obsolete space, all the stranded assets if
Speaker 1: you like, because they they're not compliant UM will be
Speaker 1: converted into residential or to other uses as well, and
Speaker 1: about well, you know, during that renovation process they'll solve
Speaker 1: both both the energy compliant problems as well as getting
Speaker 1: the property use is aligned more with demand, which is
Speaker 1: the big thing that we're facing at the moment. So
Speaker 1: aside from UM longer term having to retrofit their offices
Speaker 1: to fit the climate rules, UM in an immediate basis
Speaker 1: in terms of trying and bring people back. You were
Speaker 1: starting to mention this before, but what are the souped
Speaker 1: up cool things that officers are going to try and do. Well.
Speaker 1: They want more immunities in the properties UM. You know,
Speaker 1: they want some meeting space, and I think there's mixed
Speaker 1: use sort of campus style. UM is really gaining some traction.
Speaker 1: British Land already has you know, sort of campus style properties.
Speaker 1: You know, it's spit like Canary Walls really which I know,
Speaker 1: you know well, which has a huge shopping center at
Speaker 1: the bottom, and it's got lots of residential towers now
Speaker 1: and as well as offices. So the ability to network
Speaker 1: physically as well as online is important. But the other
Speaker 1: thing is we're finding around Paris and London that there
Speaker 1: are sort of clusters of certain types of industry or
Speaker 1: office users. So there's the Knowledge Quarter, there's the Life
Speaker 1: Sciences Quarter, there's you know, the city the financial Quarter,
Speaker 1: and and tech quarters obviously as well. And so that
Speaker 1: the buildings and the communities there will move towards sort
Speaker 1: of attracting those employees. And I think that's something that
Speaker 1: we'll see a lot more of going forward, so much
Speaker 1: more mixed use places like London. Central Paris has always
Speaker 1: been much better because it always had a lot of
Speaker 1: residential in it that the City of London was. You know,
Speaker 1: I think we've spoken about this before, but the City
Speaker 1: of London, um, you know, it's very much just offices,
Speaker 1: and um they've already now said that they're going to
Speaker 1: allow planning for more residential. So I think it will
Speaker 1: be switching buildings to a better use that hazards and
Speaker 1: then communities. It's near good transport networks, um, there is
Speaker 1: you got good ventilation for well being, that people can
Speaker 1: control their mental health. All those sorts of things are
Speaker 1: going to be really important going forward, and it will
Speaker 1: take a year or two, I think for that to
Speaker 1: go through the system and for us to really understand
Speaker 1: how much office space is needed. But they'll be space
Speaker 1: needed for other things, all right, So thank you so much.
Speaker 1: We really appreciate that, Sue Bunden, Bloomberg Intelligence, Senior Property Analysts.
Speaker 1: That's this week's edition of Bloomberg Intelligence on Bloomberg Radio,
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