Le mie ricette per la real estate communityBy Tom Leahy, Head of EMEA Real Assets Research MSCI
Russia’s invasion seemed to signal a new era for commercial real estate .
The low-rate, low-return environment since the 2008 global financial crisis drove a boom that pushed trillions of dollars into global real estate, which depressed yields and drove prices up to record levels, according to the RCA CPPI. Russia’s invasion now appears to have signaled the end of that expansion and the start of a transition to a new world of higher rates and higher returns. The rapid rise in swap rates meant debt costs surged above property yields after years when a substantial gap had encouraged capital into the sector.
The impact of rising interest rates was most acutely felt in Europe, and particularly in Germany, where the country’s reliance on Russian energy proved to be its Achilles heel. As such, German property sales started to slow in April, sank to a six-year low for the first half of the year and continued to fade through the rest of 2022. That said, global transaction volumes were down 64% in the fourth quarter, and very few countries escaped the slowdown, as buyer and seller price expectations moved apart, leading to a substantial drop in liquidity.
In the short term, further easing in inflation, plus stability in bond yields and debt costs, would provide a degree of security and give buyers and sellers more solid ground on which to make their buy-sell-hold decisions.
Once past this shorter-term disruption, the question is where real estate fits into a remodeled investment landscape. Core property effectively acted as a bond substitute during the low-rate regime, but interest rates and bond yields will likely settle at a higher level than during the last cycle. This means property may serve a different purpose in a multi-asset-class context.
Source : MSCI