Morgan Stanley | Bart Gysens (analyst) revises down the bearish scenarios for the European property sector and maintains an Attractive view, although he highlights that risks are now more symmetrical. He ranks the sector according to five criteria: 1) impact of higher interest rates; 2) HALO characteristics (heavy assets with low obsolescence); 3) ability to go on the offensive and/or scope for self-correcting measures; 4) significant changes in fundamentals —such as shifts in pricing power between retail and logistics, with recent data showing a rise in e-commerce penetration—; and 5) relative valuation. He becomes more constructive on warehouses and upgrades Segro to Overweight. He also upgrades Merlin to OW, highlighting its growth potential in data centres, and adds selective exposure to retail by upgrading Hammerson to OW. In contrast, he is even more cautious on warehousing and downgrades Big Yellow to UW. Furthermore, he increases caution on rate-sensitive stocks, downgrading LondonMetric to UW and reiterating its UW ratings on Castellum and Fabeg.e.
