Real estate has remained the most distressed sector in Europe, according to law firm Weil, Gotshal & Manges.
The latest European Distress Index, which analysed 3,750 listed companies across the continent, showed real estate was the most distressed market for the fifth consecutive quarter.
Falling investment metrics and high interest rates were the main drivers. Researchers said leveraged firms were grappling with rising costs, declining property values and refinancing complexities on the back of tighter liquidity and depreciating valuations.
Geographically, Germany continued to be the most distressed market across all sectors, impacted by a reluctance to invest, liquidity shortfalls and profitability dilemmas in a slow-growth economy.
In contrast, Weil noted that the UK has seen corporate distress stabilise. Nevertheless, the persistently high-interest-rate environment remained a source of pressure for firms, which are grappling with increased debt service costs, stricter refinancing conditions and diminished demand.
Despite the onset of a recession in late 2023, promising indicators such as declining inflation, a resilient jobs market and growing consumer confidence suggest a potentially brief downturn.
Andrew Wilkinson, senior European restructuring partner and co-head of Weil’s London restructuring practice, said: “While some sectors show signs of recovery, distress levels remain comparatively high. With the current macroeconomic indicators presenting a more nuanced picture than previous forecasts, we can expect capital-intensive and highly leveraged businesses to continue to feel pressure.
“Those operating in the industrials, retail and real estate sectors are bearing the brunt of these pressures. Businesses able to adjust their capital investment strategies will fare better in weathering the storm.”
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