LONDON (ShareCast) - Upbeat comments from HSBC gave real estate investment trust (REIT) stocks a boost on Tuesday, as the bank raised hopes that property companies will benefit from the UK’s ‘resurgent economic recovery’.

In a review on the wider European REIT sector, HSBC said that the UK commercial real estate market is entering ‘phase three’ of its recovery: "This is a phase where an improving and accelerating economy induces rental growth resulting in a prolonged and sustainable period of capital value growth."

The onset of "economically-induced" rental growth will be enough to offset moderately rising bond yields, HSBC added.

The bank also said that while prospects for London – "Europe’s focal real estate market throughout the downturn" – remain undiminished, there are investment opportunities now emerging in regional UK markets and select secondary property.

Of the 10 REIT stocks it covers, HSBC has six ‘overweight’ ratings, four ‘neutrals’ and no ‘underweights’.

British Land was named as its key ‘overweight’-rated company given its "cash flow valuation, low cost of debt, high rental reversion and accounting return".

The bank also highlighted British Land's exposure to Central London, combined with UK regional property with higher yields, giving the stock a 2% lift to 674.5p in afternoon trade.

Derwent London, Great Portland Estates, Hammerson, Intu Properties and SEGRO have also been labelled as ‘overweight’.

BC

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