Europe: Real Estate Transaction Slows down

Commercial real estate transactions in Europe have hit a one-year low in the first quarter of 2023, according to the recent data released by MSCI, a leading provider of investment decision support tools.

The data revealed that the transactions worth 36.5 billion euros were conducted in the first quarter of 2023, showcasing a decline of 62% from the previous year. The fall was attributed to rising interest rates causing buyers and sellers finding it challenging to agree on the asset's real price.

The fall in commercial property values and the banking turmoil resulting from the Credit Suisse collapse have compounded the concerns among the investors that real estate investors and lenders could be overstressed or in significant financial difficulty. These factors led to the investors becoming skeptical about the economic growth driving the property transactions and became very cautious.

Europe: Real Estate Transaction Slows down

The US housing market has also witnessed a decline in sales recently. In March 2023, home sales in the US saw a large-scale fall, indicating a less optimistic start to the home sales season in the US. The high mortgage interest rates inevitably reduced the motivation of Americans to invest in buying homes.

The sales of used homes witnessed a 2.4% fall from the previous month to 4.44 million units in March 2023, according to the American Association of Realtors. Home sales in March 2023 also decreased by 22% year-on-year.

The US housing market saw recovery in February 2023 after the sudden increase in sales by 13.75% compared to the previous month. However, after mortgage rates climbed, home sales saw a decline once again. Consequently, by the end of March 2023, home sales in the US had decreased 13 out of 14 consecutive months.

Paris has defied the trend of falling markets with fixed trading volumes, overtaking London as the top investment destination. The trading volume saw a fall of 58% in the UK capital.

Despite the challenges, some Asian investors took advantage of the weak pound to purchase offices in London. However, the rise of hybrid work during the COVID-19 pandemic has worsened the difficulties that office owners face.

According to MSCI data, the French office market has been boosted significantly by a few substantial deals, including the Kering Group's purchase of two buildings in Paris for a total of €1.5 billion.

The decline in Commercial real estate transactions in Europe and the US has been a worry for the investors. However, the French office market and Paris seem to be taking the steps for the recovery, and it is hoped that these trends will continue to recover.