MSCI Real Assets saw a sharp fall in European commercial real estate investment in early 2023. The lowest level in 11 years stemmed from investor worries over high rates together with economic fog. They paused acquisition plans.

Europe’s office sector, the largest segment of the region’s real estate market, experienced an unprecedented decline in sales, with the number of transactions reaching a record low. Additionally, the transaction volume plummeted to its lowest point in 13 years, totaling 10.8 billion euros ($11.94 billion).

While the United Kingdom maintained its status as the largest commercial real estate market in Europe, Paris emerged as the region’s most dynamic investment destination, surpassing London. The three largest property deals in Europe during the first quarter of 2023 occurred in the French capital.

Fears about financial stability now involve the commercial property market. Steep rate rises, recession risks, together with post-Covid drops in offices and retailers drive anxiety. Consequently, these factors have exerted significant pressure on property values.

A JPMorgan poll of investors saw commercial property as most likely to cause the next financial crisis. Big U.S. banks worry about CRE risks. European lenders have less exposure per IMF assessments. Tom Leahy of MSCI said real estate financing worries after bank panic in March didn’t cause many forced property sales.

Blackstone, a leading asset manager, experienced a decline in first-quarter earnings due to the slowdown in commercial real estate, which hindered some asset sales. In response to a significant rise in redemption requests, Blackstone has limited withdrawals from its real estate income trust.


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