Global Commercial property transactions collapse: Real estate is no longer a gold asset
Commercial property owners have thrived in a world of cheap debt, which has made real estate investments relatively attractive. But as interest rates rose, this high led to a predictable reckoning:
"The scale of the cyclical resetting in property valuations is as big as the early 1990s or the global financial crisis," said Alex Knapp, chief investment officer for Europe at Hines, a $100 billion global private real estate investor. "This is a big one, if that wasn’t obvious."
Many property owners are saddled with unrealized losses. Tom Leahy, executive director at MSCI Research, estimated in September that about 50% of commercial real estate assets in London are now worth less than what they were bought for. New York is doing relatively well, with only one in five in the red, but many office owners there face big losses.
Owners will do everything in their power to prevent these losses from materializing. Official valuations often lag behind market reality because they rely on evidence of other deals, which have stalled. The value of completed deals fell more than 50% in the third quarter compared with the same period last year in Europe and the U.S., according to $MSCI Inc(MSCI)$ .
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