Analysts predict European commercial real estate shares could rise by up to 20% in next 12 months

Written by Ray Clancy

Monday, 06 September 2010 10:20

European commercial real estate shares may rise as much as 20% over the next year as investors buy stocks currently trading more than 25% below the value of company assets, it is claimed.

Land Securities Group, Capital & Counties Properties and Alstria Office REIT-AG, may gain as much as 30% over the period, London based analysts including Harm Meijer said in their annual property handbook.

‘The glass is half full for the listed property sector. Most balance sheets are sorted out, most stocks own quality assets or have exposure to the right sectors,’ it says.

UK real estate investment trusts have slumped 67% since their introduction January 2007. That’s even after they rebounded by more than 70% from lows reached in March last year. European property stocks tracked by JPMorgan are trading at an average 28% discount to net asset value, it adds. That gap may attract generalist investors as well as specialists in real estate, Meijer said.

Shops and offices in London’s West End district have the best prospects in the next 12 months, according to the report. Retail property values in central London may rise by almost 5% a year until 2014. West End offices could increase more than 3% annually. Rents may surge by 47% in the West End and 45% in the City of London financial district over the period, it is predicted.

Alstria, Germany’s first REIT focusing on offices, has a quality portfolio with long leases and managed to refinance without needing to sell new shares, according to JPMorgan.

In a worst case scenario, such as deflation, property stock prices across the market could fall as much as 20%, JPMorgan added.