Shares in Land Securities Group PLC (LON:LAND) and rival British Land Company PLC (LON:BLND) were down on Friday amid a split in analyst views of the sector ahead of results next week.
UBS was on the more sanguine side, though it predicted Landsec’s net asset value would be down 3.2% and British Land’s down 0.9%, while Barclays rained on the parade.
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“It's been almost three years since the referendum, and the UK office market has not entered the 'melt-down' many feared and has held up remarkably well,” UBS said, pointing to Knight Frank's recent predictions that London will accelerate this year despite all the Brexit uncertainty.
With the chief executive Robert Noel having been notably cautious on the sector in the past, “It will be interesting to hear Landsec's read on the market,” UBS said.
A more gloomy read on the market outlook was already available from Barclays, which had a slightly less negative view of the London office market but expects retail rents to face “further, and accelerated, weakness”.
Further property write-downs in store
Barclays analysts see weak rents heaping pressure on both earnings and resulting in further write-downs in the retail portfolio, which will hit near term NAV estimates.
The bank now expects flat earnings growth for both the coming results and beyond. “This effect is more pronounced for British Land, given its higher exposure to the challenged retail warehouse segment,” at around 25% of its total portfolio, while Landsec's retail portfolio is more exposed to higher quality Central London retail and hotels.
Barclays downgraded its price target for British Land 14% to 500p and cut its rating to ‘underweight’, while leaving its rating for Landsec at the same point but cutting the target 4% to 755p.
UBS has a ‘buy’ rating on both stocks, with a 740p target for BLND and 1,075p for LAND.