The gap between offices buyers’ and sellers’ pricing expectations has “grown significantly” in big European and North American cities, according to index provider MCSI – with offices faring worse in this regard than industrial or residential assets.
The company said the gap that now needs to be bridged to get market liquidity back to its “long-run average” has grown in cities including Amsterdam, San Francisco, London, Paris and several German cities.
“The current illiquidity in many global transaction markets is largely due to the pricing uncertainty caused by the sharp rise in interest rates following years of benign rates,” MSCI said. “There is less agreement between buyers and sellers on where properties should be priced, meaning that fewer deals have been completed.”
In Germany, MSCI said, the “price gulf” for offices had grown to -36% at the end of the third-quarter from -7.5% a year ago, on top of a 14% fall in deal prices over the same period.
“For greater liquidity to return to the transaction market, there has to be greater agreement on where property should be priced, which requires some more clarity on the trajectory for interest rates,” the company said. “If investors expect that, with inflation falling, central banks are largely done with the tightening cycle, this may allow buyers and sellers to move closer together. In the meantime, mind the gap.”
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