Property stocks were among the biggest casualties yesterday as the market’s recent strong run came to a halt with an almighty thud. The sector took a battering after JPMorgan joined the ranks of those who believe that its 55% advance since March has been too fast and too furious.
It believes that rental income will be worse than expected next year, with vacancy rates rising to 16% in the City and rental values for London offices continuing to decline, falling by as much as 50% from their peaks. Add in the risk of tenant defaults, tough rent renegotiations and the prospect of having to pay rates on empty properties and there isn’t that much for investors to smile about.
Moreover, 44% of the commercial property stocks that it covers across Europe still face refinancing issues, with the prospect of covenant breaches looming large and the danger that the UK commercial property market as a whole could move into negative equity in the second half of the year.