For property stocks 2025 was a "year that could have been", and JPMorgan believes the sector is ready to "go again" in 2026, backed by low investor expectations, stabilising macro conditions and emerging structural themes.
The US investment bank, which is not pushing this view for the first time, sees average upside of over 20% across its coverage, with top picks including SEGRO PLC (LSE:SGRO), German-listed Vonovia and Spain's Merlin Properties, offering potential gains of up to 40%.
Despite inflationary headwinds, particularly in the UK, and persistent yield pressures, analysts noted that positioning in the sector has reached levels of "capitulation," paving the way for a recovery.
In a note to clients, JPMorgan outlined three key themes for 2026: first, listed property as a vehicle for private equity exits, following October’s Tritax Big Box and Blackstone deal; second, the impact of AI on office demand as automation concerns grow; and third, data centre's need for electric generation "expected to be one of the key bottlenecks for data centre growth".
The bank downgraded Covivio and Derwent London PLC (AIM:DLN) to 'neutral' ratings, citing valuation, while keeping an 'underweight' on continental European names Castellum, VGP and WDP.
"Low expectations in the shares plus limited positioning in the sector, a more benign macro environment with a continuation of the positive underlying themes seen in 2025 set the sector up for outperformance in 2026."