By Naomi Rovnick
LONDON (Reuters) – Commercial property stocks and bonds are rallying as forecasters widely predict the end of a market slump triggered by a multi-trillion dollar debt burden.
Real estate investment trusts (REITs), the stock-market listed commercial building owners, have rebounded to levels last seen before U.S. lender Silicon Valley Bank collapsed in March 2023, sparking fears of a major credit crunch for landlords.
Commercial property bonds are also pricing better times ahead as flows into property investment funds pick up.
The rally is pegged firmly on hopes that major central banks will cut interest rates from multi-decade highs, relieving intense pressure on landlords and their lenders and driving forecasts that buildings will stop losing value.
“We’re close to the bottom of the market, we really believe it,” said Kim Politzer, head of European real estate research at Fidelity International.
“For us it seems sensible now to be planning to deploy more money into it.”
With UK commercial property values down by about 25% from a mid-2022 peak, Nick Montgomery, head of UK real estate investment at Schroders, said Britain’s market was “at or near the bottom”, pointing out that rents were up 4% in 2023.
BlackRock, the world’s largest asset manager, also said this month that 2024 would be “an entry point” for cheap real estate investments worldwide.
HIGH HOPES, BIG RISKS
The remarkable rally clashes with continued warnings from major regulators about the perils faced by the sector, including from the president of Germany’s financial regulator, who on Tuesday described commercial real estate as “risk No. 1”.
”In the last month, in terms of market sentiment, there has been a markedly positive change towards real estate,” said Bernie Ahkong, co-chief investment officer of UBS Asset Management’s hedge fund unit O’Connor, adding he had not bought into
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