The UK real estate industry faces a “particularly precarious” situation in the near to medium term, according to analysts at the HSBC bank.
The bank has downgraded 11 companies in the industry - mostly dealing with commercial property - but HSBC has also changed the status of all stocks in the real estate sector so that none has a “buy” recommendation.
British Land and real estate investment trust Land Securities Group have both been double downgraded to “reduce” while Hammerson, best known as a shopping centre operator with a portfolio includes Brent Cross in London and the Bullring in Birmingham, has been dropped from “hold” to “sell.”
The HSBC analysts says that with a recession in the UK looking increasingly likely and the Bank of England expected to keep base rate and interest rates higher for longer than expected, those real estate businesses with a significant amount of refinancing are the most vulnerable.
Stephen Bramley-Jackson, HSBC’s global head of real estate research, says in a note to investors: “The near to medium-term looks particularly precarious. Real estate equity is factoring in a further 20 per cent plus fall in asset prices and looming refinancing risk is a major concern.”
And he continues: "The latest inflation data followed by the higher than expected increase in policy rates by the Bank of England and upward revision of peak policy rates by forecasters all point towards another round of asset price mark-downs across the real estate sector."
HSBC itself has been part of the commercial property story in recent weeks, intending to move its global HQ from Canary Wharf to a smaller office in the City of London after its lease expires, partly attributing the decision to increased hybrid working for many staff.
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Self made recession will hit Uk like a train - thats really just what we needed.
Clowns running an unfunny clown show. Still at least they are bringing in 1000 Drs and Dentists a day on boats to save the economy.
You are being unfair we should all work to pay tax to support them
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