{"id":55894,"date":"2023-04-23T17:27:48","date_gmt":"2023-04-23T14:27:48","guid":{"rendered":"https:\/\/amlak.net.sa\/?p=55894"},"modified":"2023-04-23T17:27:48","modified_gmt":"2023-04-23T14:27:48","slug":"%d8%aa%d8%b2%d8%a7%d9%8a%d8%af-%d8%a7%d9%84%d9%85%d8%ae%d8%a7%d9%88%d9%81-%d8%a8%d8%b4%d8%a3%d9%86-%d8%a7%d9%86%d9%87%d9%8a%d8%a7%d8%b1-%d8%b3%d9%88%d9%82-%d8%a7%d9%84%d8%b9%d9%82%d8%a7%d8%b1%d8%a7","status":"publish","type":"post","link":"https:\/\/amlak.net.sa\/en\/55894\/","title":{"rendered":"Concerns grow over the collapse of Europe's commercial real estate market"},"content":{"rendered":"

Concerns are growing about the health of the commercial real estate market in Europe<\/a><\/strong>Some investors are wondering if the next sector will implode.<\/p>\n

In the aftermath of the banking crises last March, fears of a so-called doom loop arose, where a potential bank run to exit any high-risk investments could trigger a downturn in the real estate sector.<\/p>\n

European funds directly invested in Real estate<\/a> <\/strong>Outflows of \u00a3172 billion ($215.4 billion) in February, according to Morningstar Direct data.<\/p>\n

Some analysts now see real estate stocks falling by 20%-40% by next year, and possibly exceeding 50% in the worst-case scenario, meaning Europe is in for a crisis that could last for months or even longer.<\/p>\n

Higher interest rates have increased the cost of borrowing and low valuations in Real estate sector<\/a><\/strong>which has prevailed in recent years amid low bond yields, amid declining buying interest.<\/p>\n

Meanwhile, the collapse of US-based Silicon Valley Bank in March and the subsequent emergency rescue of Credit Suisse led to fears of a so-called doom loop, where a potential bank run could trigger a downturn in the real estate sector.<\/p>\n

The European Central Bank warned earlier this month of \u201cclear signs of weakness\u201d in the real estate sector, citing \u201clow market liquidity and price corrections\u201d as causes of uncertainty, and called for new restrictions on commercial real estate funds to reduce the risk of a liquidity crisis.<\/p>\n

Analysts at Citi now see shares of European real estate<\/a><\/strong> It drops by 20% to 40% between 2023 and 2024 as the impact of rising interest rates kicks in. In the worst-case scenario, the high-risk commercial real estate sector could fall by 50% by next year, the bank said.<\/p>\n

CNBC quoted Pierre Grame\u00f1a, managing director of the European Stability Mechanism, as saying: \u201cSomething I don't condone is a crisis in real estate, both for individuals and in commercial real estate, where we see downward pressure in both the US and Europe.\u201d.<\/p>\n

The office sector - a key component of the commercial real estate market - has also emerged as a focus of potential downturn concerns due to broader shifts towards remote or hybrid working patterns in the wake of the COVID-19 pandemic, which has led to a decline in demand for office space.<\/p>\n

This has deepened concerns about which banks may be exposed to such risks, and whether the wave of forced sales could lead to a downward spiral.<\/p>\n

According to Goldman Sachs, commercial real estate accounts for about 25% of US banks' loan books - a figure that rises to as much as 65% among smaller banks, the focus of recent stresses. That compares to about 9% among European banks.<\/p>\n

Amid this uncertainty, and what it described as stretched valuations, Capital Economics last month increased its peak-to-trough forecast for the eurozone real estate sector correction from 12% to 20% downwards, with offices expected to perform at their worst.<\/p>\n

As of late 2022, European office vacancy rates stood at around 7%, well below the 19% in the US, according to real estate consultant JLL.<\/p>\n

JPMorgan disagrees that there is a real estate crisis in Europe, saying late last month in a research note that fears of the U.S. downturn spreading to Europe are overblown, especially real estate.<\/p>\n

Analysts at the bank said: \u201cFundamentally, we believe that any contagion from US banks or commercial real estate in the US to their European counterparts is unwarranted, given the different sector dynamics.\u201d.<\/p>","protected":false},"excerpt":{"rendered":"

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