Five reasons why European CRE isn’t out of the woods yet
Our view is that European commercial real estate (CRE) is not out of the woods yet, but things are looking better than before the summer.
What you will learn:
- It is no surprise that we expect offices to be the worst-performing sector in Europe with low double-digit value declines. Residential is next, given the mathematical impact of outward yield shift on low yields, although rental growth prospects remain healthy.
- There are five key headwinds that will weigh on a quick recovery: tight credit conditions, rock-bottom sentiment, high debt costs, inadequate risk premia, and stagnant economies.
- A quick bounce back for values looks unlikely next year. Given the extent to which rates have risen and the gradual transmission of those increases to the market because of fixed rates with differing maturity timings, even if the European Central Bank starts to cut policy rates next year, the effective interest rate paid by the market will keep increasing.
UK: Housing market on course for a soft landing
The recent sharp fall in mortgage rates and continued strong growth in wages has significantly reduced the scale of the UK's housing affordability problem. Consequently, the risk of a steep correction in house prices is much lower than it appeared a few months ago. We also expect the recent steady pickup in housing market activity to continue.Find Out More
Property sector risks haven’t gone away
Overall, the downturn in the property sector is much less severe than in some previous cycles, especially for residential property. This is good news for growth. Still, property sector risks haven't gone away yet, especially in the troubled commercial real estate (CRE) area.Find Out More
Finding Opportunities in a Weak Global Economy
Oxford Economics set the stage for the year ahead, at our inaugural Global Economic Outlook Conference, in London on Wednesday, 24th January.Find Out More
US e-commerce spending points to industrial outperformance
Our expectation for the US industrial sector to outperform other major commercial real estate sectors is predicated on the persistence of e-commerce sales growth supporting US warehouse demand. Over the next five years, we predict industrial total returns will average 6.9% per year, compared to all-property returns of 6.4%.Find Out More