HSBC Holdings PLC (LSE:HSBA) has now removed all buy recommendations for stocks in the real estate sector as the bank predicts a “precarious” situation in the near-to-medium term.
Interest rate hikes have caused a surge in borrowing costs, which have caused pain for Britain’s real estate investment trusts (REITs).
One Footsie-listed REIT tracker has underscored a 12% year-to-date decline in the sector.
British Land, a commercial property company, and Land Securities Group, a real estate investment trust, have both been double downgraded to a reduce rating.
British Land was recently pushed off the FTSE 100 blue-chip index, having seen its shares fall by over a quarter since the start of the year.
Stephen Bramley-Jackson, HSBC’s global head of real estate research, said: “The near to medium-term looks particularly precarious.
“Real estate equity is factoring in a further 20%-plus fall in asset prices and looming refinancing risk is a major concern.”
Commercial real estate has doubly suffered due to the persistent post-Covid trend of working from home.
HSBC itself has provided an example of this- the banking giant announced in June that it intends to move its global HQ from Canary Wharf to a smaller office in central London after its lease expires.
HSBC is reducing office space globally by about 40% and is ditching a quarter of the space it occupied at 8 Canada Square to reduce costs and cut energy use.
The group said the move to a smaller office would help it meet net-zero commitments and allow for flexible working.