The European Central Bank has called for a clampdown on commercial property funds.
Officials are concerned that a downturn in the €1tn sector could trigger a liquidity crisis if investors rush to withdraw their money.
“Policies should be developed to address the structural vulnerabilities” of such open-ended property funds, ECB officials warned in a macroprudential bulletin on Monday, “given the risks they pose to commercial real estate markets and wider financial stability”.
The ECB cited Blackstone Real Estate Income Trust’s recent decision to limit investor redemptions after a surge in requests to withdraw money out of its $125bn fund. It also noted limits imposed by UK property funds on outflows after last year’s mini-Budget led to a sell-off in gilt markets.
The MSCI Europe Real Estate index of large and mid-cap property companies tumbled 14% in March to close to its lowest level since early 2009.
