There will be winners as interest rates rise, but property companies are unlikely to be among them.
Banks are enjoying the tailwinds of rising rates, and restructuring and insolvency firms are naturally benefitting as zombie firms are shut down.
But real estate will find it hard to scratch a living as rising gilt yields squeeze the gap between borrowing costs and rental income.
The impact of rising interest rates is most acute for those that have enjoyed the sharpest increase in values, namely warehouse landlords such as SEGRO and the owners of central London offices, such as British Land and Land Securities.
Shares in SEGRO, which replaced Landsec as the largest property company listed in London, have fallen by 45% since the start of this year. HSBC has cut its target price on the stock to 947p, from £14.86, citing increased risk to the value of the warehouse landlord’s properties and the rents it will be able to secure.
