JPMorgan said it still sees an upside for shares in UK industrial property even if "factoring in a 90s-style correction in values".
Following a challenging third quarter, the Wall Street bank reassessed the capital value outlook for SEGRO PLC (LSE:SGRO), Tritax Big Box REIT PLC (LSE:BBOX) and LondonMetric Property PLC (LSE:LMP).
Based on a discounted cashflow analysis the analysts downgraded expectations, now seeing net asset values falling by up to 24% to the end of next year, which put their forecasts for SEGRO, for example, 20% below the City average.
LondonMetric's target price (TP) was cut to 205p from 235p, SEGRO's to 960p from 150p, and Tritax Big Box's to 175p from 205p. Ratings for all three remained 'overweight'.
"We view this new base case as conservative, but already find the group trading below trough NAVs with shares offering c.20% upside to our new PTs.
"And, even taking this size of value correction into account, LTVs for the group would only rise into the mid-low 30s."
The analysts said they favour robust balance sheets with strong pricing power, which puts industrial names at the top of the REIT list.