UK real estate stocks saw mixed performance on Wednesday, a day when forecasts of a recession abated and the prospect of inflation easing became tangible — but banking and financial stocks were pummelled due to fears that two U.S. banking failures earlier this week could be an early warning sign of more lenders collapsing.

Shares in British Land, Derwent London and Hammerson were all down by about 1%, while Landsec was down about 1.5% and NewRiver was down about 2% at the close of trading on a tumultuous day for global financial markets.

By contrast, healthcare specialist Assura and Regional REIT were up about 2%, Supermarket Income REIT was up about 1.5%, and Shaftesbury Capital was up about 1%.

Macroeconomic news affecting UK real estate was decidedly mixed. Following a budget announcement from the Chancellor of the Exchequer, the Office of Budget Responsibility said the UK would avoid a technical recession — two consecutive quarters of negative growth — in 2023, but the economy would still contract by 0.2%. Commercial property returns are closely correlated with gross domestic product.

The OBR also said that it expected inflation to fall from 10.7% in the final quarter of last year to 2.9% by the end of 2023. As inflation falls, the pressure on the Bank of England to raise interest rates will also recede. Stabilising interest rates should be positive for commercial property — values have dropped as rates have risen sharply in the past 12 months.

But the banking market on which the real estate sector relies has been shaken this week by the failure of Silicon Valley Bank and Signature Bank in the U.S., and, on Wednesday, European bank Credit Suisse was in the spotlight.

SVB collapsed because it had to raise fresh capital following the decline in bond prices, which cut into the amount of liquidity it held on its balance sheet.

Financial analysts have been wondering whether Credit Suisse might have the same problem. Its shares were down by 30% at one point, after its largest shareholder, Saudi National Bank, said it would not provide more capital to the company.

Credit Suisse CEO Ulrich Koerner said the bank had adequate capital on its balance sheet. But SVB’s failure means there are concerns other banks might suffer the same fate.

"The worry is that banks sitting on large unrealised losses in their bond portfolios might not have sufficient buffers if there is a fast withdrawal of deposits," said Susannah Streeter, Hargreaves Lansdown head of money and markets.

Shares in the UK’s two largest property lenders, Natwest and Lloyds, were down 5% and 3% respectively on Wednesday.