Respected real estate analyst Mike Prew has called the top of the UK’s real estate market and downgraded a raft of property stocks.
The Jefferies commentator said in a briefing note that all of the “buy” recommendations the investment bank had previously put in place had been repealed. He said: “REITs are now looking expensive,” adding: “Buckle up, it’s never a soft landing.”
The note stated that “bond tourists are leaving the UK and real estate tourists are hard on their heels” and that in 2016 rental growth would be “soft and patchy”. Prew also warned: “Commercial property yields are below where they were in the 1950s, when 10-year gilts last traded at 2%, which is warning enough.”
British Land, Unite, and Capital & Counties saw their ratings reversed from “buy” to “sell” while retail specialists intu and Hammerson were downgraded to “sell” from “hold”.
Land Securities, Derwent London, Workspace, Big Yellow, Safestore, Grainger and LondonMetric were downgraded to “hold” from “buy”
Great Portland, Hansteen, Shaftesbury, SEGRO and Unibail escaped downgrades, all remaining as “hold”.
As well as encouraging deleveraging within the sector, Prew’s note was particularly scathing of the retail sector, saying that those companies with a high exposure to retail would be hurt by the “suburban utopia left to rot as online shopping and the resurgence of city centres make malls increasingly irrelevant to young people”, citing the Wall Street Journal.
