JPMorgan sees City of London office values falling 20%

Office buildings in London’s financial district will lose a fifth of their value in the year through March, said JPMorgan Chase & Co analysts, who stopped recommending clients buy shares in The British Land Company.

City valuations have deteriorated in recent months, with statistics from Investment Property Databank Index showing an 8% per cent decline, analysts including Neil Green said in a note to clients.

They downgraded British Land – whose tenants include UBS Group AG and TP ICAP Group Plc – to neutral after two years at overweight.

“We are concerned that selling pressure will grow in the City office market,” they wrote, warning that unrealised losses on assets may trigger disposals.

The City of London office market has been hit by worries about the UK economy and refinancing as interest rates surged, and has faced competition from London’s West End.

A slump for British Land’s stock has seen the firm drop out of the UK FTSE 100 and MSCI’s Global Standard indexes. JPMorgan estimates that this would have resulted in passive funds offloading 83.5 million shares.

British Land was down 0.3 per cent at midday. in London, taking a year-to-date decline to 21 per cent. The stock has fallen 36 per cent since JPMorgan upgraded it to overweight in June 2021. – Bloomberg