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London Office Developers Decline After Morgan Stanley Cuts Recommendations

U.K. office developers led by Great Portland Estates Plc (GPOR) declined in London trading after Morgan Stanley cut its ratings for the companies.

Great Portland fell as much as 5.5 percent to 331.40 pence, the lowest since Dec. 1, 2010. Derwent London Plc (DLN) dropped as much as 4.1 percent, while British Land Co. declined 3.5 percent and Land Securities Group Plc (LAND) lost 2.5 percent.

Land Securities, the country’s largest real estate investment trust by market value, and British Land were downgraded to “underweight” from “overweight,” Morgan Stanley said in a note to investors today. Great Portland, which focuses on office space in London’s West End, and Derwent London were cut to “equal-weight” from “overweight.”

“What is significantly negative in our view is that most of the main U.K. REITs have sizeable development pipelines, most of which is committed and speculative,” a team at Morgan Stanley wrote in a note to investors today. “We think the likelihood of leasing up some of these schemes is declining.”

In July, U.K. commercial real-estate values rose at the slowest pace since the market started recovering from a slump two years ago. All the developers except British Land were downgraded by Bank of America Corp. Global Research earlier this month.

Land Securities was up 8.5 pence at 736.5 pence and Great Portland rose 6 pence to 361.6 pence as of the 4:30 p.m. close of London trading. British Land fell 5 pence to 539 pence and Derwent London declined 3 pence to 1,547 pence.

To contact the reporter on this story: Chris Spillane in London at

To contact the editor responsible for this story: Andrew Blackman at

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