A perfect storm of pandemic-induced remote work trends, ballooning interest rates, and a series of bank collapses have pushed commercial real estate dealmaking in Europe to an 11-year low. First-quarter sales totaled €36.5bn, a 62 percent decline from last year.
Despite a handful of Asian investors taking advantage of the depreciating pound to pounce on London office purchases, foreign investment in European real estate has drastically decreased to its lowest level since 2011. Incidentally, the office sector appears to be the hardest hit, as office transactions are the lowest they have been since records reportedly began in 2007. Paris defied the trend and overtook London as the most popular location for investment as deal volume in the UK capital plunged 58 percent. It should be noted that a relatively small number of significant transactions, including the luxury group Kering’s acquisition of two Paris buildings for a combined €1.5 billion, helped to boost the French office market.
Concerns about overburdened real estate investors and lenders becoming the next major source of financial hardship have grown as a result of declining commercial property values and unease in the banking industry. But even though European property is less exposed to the banking crisis in the U.S. (and has yielded better return-to-office trends than what has been seen in the U.S.), investors remain spooked about the warped economic landscape, thereby putting acquisition plans on hold.