Soaring energy prices, interest rate rises and the ongoing war in Ukraine have contributed to a “rapid decline” in the European real estate debt and equity markets during recent months.
The latest quarterly report from Bayes Business School showed a “sharp slump” in real estate equities, which were down by 24% over the second quarter versus a 10% drop in European equities more broadly. Sweden and Germany showed particularly sharp declines.
Bond issuance over the quarter stood at €3.7bn, down from €18.8bn in the first quarter. Nicole Lux, senior research fellow at Bayes, said companies that issued bonds in March had already seen coupons widen by up to 100 basis points from January.
Alex Moss, director of the Real Estate Research Centre at Bayes, said: “As can be expected during times of market sell-offs, the worst performance was seen in large and highly liquid stocks. We saw the largest stocks losing 16.5% compared to a decline of only 5.7% in smaller ones.
“Meanwhile, the high cost of incremental debt is forcing companies to change their business models from a debt-funded acquisition model to capital-light owner/operator.”
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