Concerns over Europe’s commercial real estate on the rise

Europe’s commercial real estate market has been on a rocky road, as investors are hesitant about its state following the recent banking crisis, CNBC reported on Friday.

The increase in interest rates has caused a decline in the cost of borrowing and valuations in the real estate sector, while instability in the banking sector has the possibility to cause a real estate slump.

There are clear signs of vulnerability in the property sector caused by the decline in market liquidity and price corrections, the sector is in need for commercial property fund curb to reduce the risks of an illiquidity crisis, The European Central Bank stated.

European funds directly invested in real estate recorded outflows of $325.4 million, data from Morningstar Direct shows. European real estate stocks are decreasing by 20-40 percent between 2023 and 2024, as a result of the incline of interest rates.