Real estate remains Europe’s most distressed sector

Real estate remains the most distressed sector in Europe despite some improvements over the past quarter. Based on data from more than 3,750 listed corporations and financial market indicators, the latest Weil European Distress Index highlights significant differences in performance across various sectors and countries. The firm said that improvements in investment and profitability have helped real estate, but that heavily leveraged companies still face challenges in refinancing in a high interest rate environment. Retail distress increased quarterly and annually, driven by reduced consumer spending and lower company profit along with liquidity pressures, exacerbated by rising borrowing costs. UK distress hit its highest level this year, fuelled by falling investment, lower profitability and tight liquidity, with industrial being the most distressed sector. Growth slowed from 0.7% in the first quarter to 0.5% in the second, with no month-on-month growth in June or July. Although there is some optimism about potential Bank of England rate cuts, Weil said uncertainty surrounding the upcoming Autumn Budget remains. In the report, Weil’s team said: “It remains a mixed picture across Europe, with a growing disparity between winners and losers across the continent. While sectors like real estate and industrials are facing significant pressures from rising costs and reduced investment, markets like Spain and Italy are showing resilience. “However, the coming months will be pivotal, with the US election, Germany’s ongoing electoral process and the UK’s Autumn Budget all likely to introduce further volatility. Businesses will need to prepare for potential shifts in trade policies, fiscal tightening, and market uncertainty, which could further widen the gap between resilient and distressed sectors.”