CLS bets on Germany as recession looms

According to data from Ipsos, Germans are feeling more than twice as optimistic about the economy right now than are Brits. The reasons for this may or not be valid but economies are – more than anything else really – about how consumers feel and how they act. As such, the news that Germans are feeling good is good news for the Germans.

It is also good news for CLS (CLI) – at least partly – which posted a positive set of results for the six months to 30 June. Some 39 per cent of the office landlord’s portfolio by value is in Germany, with 49 per cent of it in the UK and the remaining 12 per cent of it in France. Based on how the German economy seems to be faring relative to the British one, it should come as no surprise that the company has nudged up its exposure to the German market and nudged down its exposure to the UK since its last half-yeasr results. CLS’s straddling of three very different office markets allows it to respond to medium-term changes in the economic prospects of one nation at a medium-term pace. It also spreads its risk.

However, regardless of nation, CLS still has to reckon with the mixed outlook for the office market generally. While it has collected over 99 per cent of its rent, the percentage of its portfolio which is not let to anyone has increased to nearly 7 per cent. That figure is not worryingly high, but it’s also not ideal. Neither is the company’s drop in pre-tax profit. Hold.

Last IC View: Hold, 201p, 16 Mar 2022