As financial markets continue rallying, UBS has said European real estate stocks are the “most crowded short” across all sectors and global markets. Crowded trades refer to a situation in which a large number of investors hold similar views and concentrated positions on certain stocks or markets. In this case, many are betting against and aiming to profit from drops in European property stocks. “European real estate stands as the most crowded short in all sectors and markets. This started in Q4 2021 and further increased as commercial real estate risk has come into the spotlight in recent months,” UBS equities analysts Charles Boissier and Christopher Tong wrote in a note to clients on Dec. 12. The data from UBS comes as the pan-European Stoxx 600 index hit its highest point since January 2022. According to the investment bank’s proprietary data, specific companies seeing significant short interest include Swedish firms Samhallsbyggnadsbolaget and Balder and Germany-listed landlord Aroundtown — the three most shorted real-estate stocks tracked by UBS. The bank said nearly one in five of SBB’s shares were used to bet on a price decline, even after recent covering. Covering is the act of reducing a bearish bet. The Swiss bank regularly analyzes such trends to identify market opportunities for its clients. Investors should note that excessive crowding can signify markets are positioning for an outcome that may or may not materialize. UBS also flagged two key implications of the high concentration of shorts targeting European real estate names. First, any positive news or sentiment shift could spur a rush to cover these positions and lead to sharp rallies. Second, markets may underestimate Europe’s property sector, which trades at a 23% discount from estimated net asset values. On the long side, UBS noted little evidence of overcrowding in markets like France, Switzerland, and the U.K. One exception is student housing, which has drawn investor interest alongside logistics and residential sectors.
