These companies are most likely to surprise in real estate H1 earnings season

Investing.com -- Bernstein expects a mixed but potentially positive first-half earnings season for the European real estate sector, highlighting nine companies that could raise their guidance.

The firms that are “most likely to surprise” include LEG Immobilien AG (ETR:LEGn), VGP (EBR:VGP1), Segro (LON:SGRO), Merlin Properties SA (BME:MRL), and Mercialys (EPA:MERY), according to the broker, citing a range of catalysts from leasing progress and disposal activity to valuation uplift and guidance revisions.

For LEG, upgraded to Market Perform, a key focus is on asset sales. “LEG is said to be close to securing a portfolio disposal,” analysts led by Valerie Jacob noted, which could accelerate its leverage reduction plans.

Meanwhile, VGP’s update is expected to center on joint venture deals, where “progress with property disposals to existing (Allianz (ETR:ALVG), Deka, Areim) or with new JV partners will be a focus,” the team added.

Segro may benefit from improved occupancy and rental growth, especially as the market looks for signs of recovery in the logistics sector. The company could positively surprise if it shows progress on leasing and development.

For Merlin, its Data Centre valuation uplift is expected to be in focus following the lease-up of Bilbao-Arasur. A further pipeline expansion or re-letting activity could boost sentiment.

Mercialys, meanwhile, could draw attention through news related to its hypermarket space, particularly following the acquisition of Saint-Genis 2 for €146 million. Bernstein expects full-year funds from operations (FFO) in line with guidance despite a temporary dip in first-half earnings.

Beyond individual company catalysts, Bernstein also flags broader sectoral trends. “Overall, we expect listed real estate companies to report solid rental growth over 1H25, driven by indexation (across Continental Europe) and positive leasing trends for most,” the analysts said.

That said, the firm flags that macro and political uncertainties are still weighing on sentiment.

“In the short-term, news on tariff deals could continue to create volatility. Medium-term risks could arise from tariff implications, stability of governments and deficit expectations in France and the U.K. and the impact of the medium-term fiscal plans in Germany,” the note says.

With respect to valuations, Bernstein’s coverage universe trades at a 31% discount to its forecasted net tangible assets for full-year 2025, well below the long-term average discount of around 10%.

Despite recent turbulence, the broker sees this as a supportive backdrop, especially in the U.K., where it views the recent sell-off as a buying opportunity, highlighting Outperform-rated names like British Land (LON:BLND) and Land Securities Group (LON:LAND).

Bernstein also upgraded Covivio SA (EPA:CVO) to Outperform and both Carmila SA (EPA:CARM) and LEG to Market-Perform on valuation grounds, while reiterating positive views on Segro, British Land, and CTP NV (AS:CTPNV), and maintaining Underperform ratings on Warehouses de Pauw Comm VA (EBR:WDPP) and Aroundtown SA (ETR:AT1).