London-listed REITs slump as Liberum downgrades on Brexit risks

Liberum downgraded its ratings on British Land, Land Securities, Intu Properties and Hammerson as it pointed to greater occupier uncertainty in London City offices and retail following the UK’s decision to leave the European Union.

“Irrespective of economic stabilisers and low interest rates fuelling appreciation in asset values, the uncertainty of Brexit inevitably increases occupier risk,” said the brokerage, adding that Brexit risks outweighed the potential support from a weak sterling.

Although it’s still too early to gauge the full extent to which UK real estate values will correct due to investment market uncertainty and the risk of weakness in occupational demand, using initial GDP revisions and history as a guide, Liberum models a correction of around 5% in values. This has led the brokerage to downgrade real estate net asset value estimates by around 10%.

It noted occupier demand in London Office is particularly sensitive to economic confidence, with elements of the financial services sector reliant on EU passporting and trading euro-denominated securities.

In April 2016, PwC estimated that between 70,000 and 100,000 financial services jobs could go by 2020 in the event of Brexit.

“We view the City as most exposed and British Land has the greatest proportionate exposure to this segment.”

It downgraded British Land, Land Securities and Intu Properties to ‘sell’ from ‘hold’. Liberum cut Hammerson to ‘hold’ from ‘buy.’

At 1250 BST, British Land shares were down 6.6% to 568.50p, Land Securities was down 6% to 977p, Intu Properties was down 3.9% to 280.23p and Hammerson was 4.2% lower at 510p.