Jefferies downgrades REITs
Jefferies has downgraded six REITs, reinforcing its “underperform” rating for the UK REIT industry for 2017.
In the New-York based investment banker’s annual outlook, it downgraded Hammerson, Derwent London, Great Portland and Workspace to “underperform”, and Big Yellow and London Metric to “hold”.
The firm said it did not see good enough value in the REIT sector, despite its 17% discount.
Jefferies has downgraded six REITs, reinforcing its “underperform” rating for the UK REIT industry for 2017.
In the New-York based investment banker’s annual outlook, it downgraded Hammerson, Derwent London, Great Portland and Workspace to “underperform”, and Big Yellow and London Metric to “hold”.
The firm said it did not see good enough value in the REIT sector, despite its 17% discount.
The historic trading range for the sector was between -50% and +10%, Jefferies said.
London’s headline rents were likely to fall by 20% in 2017-18, said the firm, which expects 100,000 jobs to leave the City and tenants to use Brexit as leverage to keep rents low.
Jefferies also warned that the UK commercial real estate market was overly dependent on foreign capital. Given a higher cost of capital for domestic money, the analysts said there would be a “gapping out” between overseas and local investors, leading to a fall in commercial property prices.
Jefferies said: “We need to see trough property valuations coincide with trough share ratings before we repeal our underperform recommendation and we don’t think we have either yet.”
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