London (FFN Business) – European real estate funds, managing assets worth around €166 billion, are under pressure. With office demand plummeting, fund managers are offloading other assets like residential properties, warehouses, or properties with redevelopment potential to meet investor withdrawals.
This forced selling could worsen market conditions and delay recovery, potentially impacting the broader economy. “There’s a mad scramble to sell,” said Henning Koch, CEO of Commerz Real.
Amundi, Europe’s largest asset manager, is selling business parks to Blackstone after struggling to sell office buildings. This move will provide liquidity to investors and allow Blackstone to potentially convert parks into logistics facilities.
Unlike stocks or bonds, real estate assets are illiquid and difficult to value accurately. Strict regulations in Germany, prohibiting asset sales at significant discounts, further complicate matters.
The European Central Bank has warned of potential market crashes due to real estate fund issues. Banks are increasing loan loss provisions and tightening lending standards.
Deutsche Bank’s recent announcement of increased loan loss provisions due to commercial real estate woes highlights the industry’s challenges.
The European commercial real estate market faces a complex situation. Forced asset sales, stricter regulations, and economic uncertainty are creating headwinds. A full recovery is likely to be a long process.
