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"We believe that ongoing concerns in the financing markets and current balance sheet positions mean that our real estate companies are likely to face headwinds, not storms, in terms of the availability of additional debt and borrowing costs," Goldman analyst Julian Livingston-Booth told clients in a research note.

While headline debt ratios across the sector appear weak for this stage in the cycle, but there are enough mitigating factors to suggest limited risk of covenant breaches even if economies suffer a hard landing, he argued. Instead, the Goldman analyst was concerned that real estate companies lack the firepower to take advantage of any potential opportunities to buy at distressed prices, and instead will face years of borrowing costs edging higher.

Goldman also argued that there are testing times ahead in the occupier market. Using GDP forecasts as a guide it modeled the office rental market in the UK and Spain to contract by 4% and 9% respectively this year. with the UK downturn already taking hold.

"Such cycles last typically around four years, suggesting a quick recovery is unlikely," Livingston-Booth wrote. "Furthermore, news flow from tenants is increasingly concerning. We believe Europe is likely to follow, though delayed and more muted.

"As we believe some significant turns in rental cycles are likely and relative valuations are not supportive, we remain cautious on the sector. We would avoid the UK and Spain; we favour France and Scandinavia on the basis of lower gearing and rental growth less at risk from economic weakness."

The US broker made a raft of changes to its real-estate stocks under coverage, including adding Land Securities to its "conviction sell" list with a target price of £12.01, 24% below current levels.

"Land Securities' is almost entirely UK focused – 46% of its portfolio is in London offices – making it one of the two most exposed stocks in our European coverage universe to what we consider a difficult UK market," Goldman said.

"We see further opportunity for underperformance as a result of its de-merger plans where the operational risk reward appears unattractive in our view. This does not appear a good time to try and renegotiate financing terms with banks while there is never a good time for higher on-going cost and one-off restructuring costs for limited operational benefit."

Goldman also downgraded Hammerson to "sell" from "neutral" and cut British Land to "neutral" from "buy".

Its only positive recommendation on the British stock market was the AIM-listed Dolphin Capital, which makes early-stage investments in Greek holiday resorts. Dolphin was added to the broker's "conviction buy" list.

"We believe it is easy to categorise Dolphin in two different ways based on a simple description of its business: bull market, finance hungry, risky venture, or well positioned, structural growth opportunity. Based on our forecast of circa 45% broad-based annual net asset value per share growth, we believe the latter is true," Goldman told clients.

"We believe the attraction of Dolphin’s shares increases on the basis that it is less exposed than other European real estate companies to the heightened economic and financing uncertainty. Our conclusion is based partly on geography, partly on its low land prices and partly on the structural growth story around the development of tourism in Greece."

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Financial Information for Land Securities Group PLC