Intu Properties PLC (LON:INTU) and Hammerson PLC (LON:HMSO) were downgraded to ‘sell’ while Great Portland Estates PLC (LON:GPOR) and Capital & Counties PLC (LON:CAPC) were upgraded to ‘buy’ by Liberum in an analysis of the UK real estate industry.
The broker reckons that almost everyone will survive the coronavirus crisis, in a scenario where the lockdown lasts until June, but many “will pick up bruises along the way”.
Shopping centre owner Intu is not expected to make it without covenant waivers and government help, while sector-peer Hammerson is likely to require extra equity.
“While we expect property values to keep falling under lockdown, we see share price value in those with the strongest balance sheets and best exposure to property mega-trends, which the Covid crisis will now likely accelerate,” analysts commented.
According to Liberum, the market will see increasing demand for prime office space and industrial warehousing, while the divide between the owners of ‘wants’ and ‘needs’ retail assets will widen.
Across the sector, like-for-like rental growth is expected to drop 18% over the next 12 months, to recover by 13% the following year – with retail as the worst-positioned and industrial suffering little damage.
On Tuesday at noon, shares in Intu and Hammerson slipped 4% to 5.28p and 59.19p respectively, Capital & Counties and Great Portland Estates rose 1% to 160.4p and 672.4p respectively.