Research Briefing | Jun 7, 2023

Europe Commercial Real Estate outlook downgraded as credit conditions tighten

Recent bank funding turmoil will lead to additional tightening in credit conditions for commercial real estate (CRE) at a time when the asset class is already reeling from higher debt costs, an inadequate risk premium, and emerging refinancing distress. This has prompted us to downgrade our baseline forecast for eurozone CRE values over 2023-2024.

What you will learn:

  • We now expect eurozone all-property capital values to fall by 10% this year, after a 3% correction last year, and see slower growth in 2024. This is a sharper decline than we saw during the global financial crisis (GFC).
  • The situation is fast moving and fluid. Any further intensification of stress in the wider financial sector would have additional severe implications for our forecast.
  • Higher debt costs will result in refinancing shortfalls for many assets this year. We identified offices and retail, particularly in the UK, the US, and Germany, as areas where the financing shortfall could be most significant.
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