Retail landlords started chewing their fingernails in 2007 as concerns mounted that key tenants might become bankrupt. Shares in US retail real estate investment trusts (Reits), as measured by the FTSE Nareit index, sank 16 per cent last year.

But, since the beginning of 2008, as bankruptcies have started to pile up, the sector’s shares are up 9 per cent. After Linens ’n Things filed for bankruptcy last week, the shares of Kimco Realty and Developers Diversified Realty, both of which have exposure to the home goods retailer, barely blinked. Any reaction would have been largely symbolic – the stores Linens plans to close account for less than 1 per cent of their portfolios’ revenues, according to Green Street Advisors. Has the market already priced in the worst or are investors underestimating the extent to which bankruptcies could boost vacancy rates?