Commercial Real Estate Transactions in Europe and US Fall as Interest Rates Rise



Commercial real estate transactions in Europe and the US have fallen sharply in the first quarter of 2023, according to the latest data from MSCI.

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Commercial real estate transactions in Europe and the US have fallen sharply in the first quarter of 2023, according to the latest data from MSCI. The decline has been attributed to rising interest rates, banking turmoil, and concerns over economic growth, causing investors to be more cautious.

In Europe, transactions worth €36.5 billion were recorded in the first quarter of 2023, down by 62% from last year. The sharp increase in interest rates has made it difficult for buyers and sellers to agree on the real price of the asset. This has led to falling commercial property values and anxiety among lenders and investors. Foreign investment inflows into European real estate also plummeted to the lowest level since 2011.

Commercial Real Estate Transactions in Europe and US Fall as Interest Rates Rise

The impact of the Covid-19 pandemic has also contributed to the difficulties faced by office owners, leading to a record low in office transactions since 2007. However, Paris has bucked the trend with fixed trading volumes, overtaking London as the top investment destination as trading volume in the UK capital fell 58%.

Meanwhile, in the US, home sales in March 2023 fell on a large scale, leading to concerns over the start of the home sales season in the US. High mortgage rates in the United States have affected Americans' motivation to buy a home, resulting in sales of used homes falling by 2.4% from the previous month to 4.44 million units. This is a 22% year-on-year fall in home sales, with the US housing market witnessing 13 out of 14 consecutive months of decline.

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The February 2023 recovery in the US housing market, with a 13.75% increase in sales, was a short-lived one, as home sales fell again when mortgage rates went higher.

The decline in commercial real estate transactions in Europe and the US highlights the impact of rising interest rates and the cautious stance of investors. The uncertainties surrounding the economic outlook and the post-pandemic world have led to anxiety among lenders and investors, causing transactions to fall to a one-year low. This situation underlines the need for policymakers to adopt policies that can support the real estate sector and help businesses navigate through these difficult times.

Commercial Real Estate Transactions in Europe and US Fall as Interest Rates Rise

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