Interest rates

The repricing in global financial markets since Russia’s invasion of Ukraine in February has put upward pressure on financing costs in Europe’s real estate sector.

The cost of debt increased overall in Q1 2022, remaining stable only in Zurich, according to real estate investment service CBRE.

In a webinar last week, the French bank argued the provision of debt in European real estate markets has not been significantly impacted by political and economic factors.

Financings like the £60m, five-year revolving credit facility for Supermarket Income REIT should become more regular in the UK grocery retail sector as demand mounts.

Lower-for-longer conditions are driving capital into property markets. But persistently low interest rates are also a concern for real estate investors and lenders.

Historic low rates are a boon for capital seekers, but institutional investors face newfound uncertainty as lower for longer threatens to become lower forever.

Debt market sources say some banks are agreeing to drop interest rate floors as they compete for core, senior financing deals in liquid markets.

The impact of the ECB’s monetary policy reversal, growing caution in the banking sector, and the importance of lending selectively were among the concerns at this year’s EXPO Real.

Debt providers will see rising interest rates, slower growth in European markets and more political uncertainty in 2019.