Three years after the end of last ‘golden’ period for the real estatethe world market at last shows the first, cowardly signs of recovery. OR fall in interest rates rejuvenates some of the conditions that had led to the previous rallywithout promising a new era of “easy money”.

Investors know how borrowing no longer cheap, as the period after the judgment of 2008. Thus, the big question that employs about 40,000 industry executives gathered this week at Munich For the conference Expo Real is one: Is now the right time to return to the market?

“We cannot wait to get out of a valley, we must accept that this is the new normal“, Commented the deputy CEO of Savills Germany, Karsen Nemechek.

From prosperity to freezing

For more than a decade after the financial crisis, real estate investors in Europe borrowed interest rates around 2% and bought real estate with 5% or higher yields – a “magical” equation that made debt efficient (“Accretive”).
All of this changed with the war in Ukraine and the interest rate jump, which led to the fall of prices and the “freeze” of large transactions.

Now, the Increase cuts by the ECB breathe. The funded markets return, mainly to areas such as logistics and offices. According to CBRE data, the total cost of borrowing in euros has fallen under the yields of “prime” properties for the first time since 2022.

The ‘bulls’ go back to the market

Among the most optimists lies the Blackstonewhich sees an opportunity due to reduced building activity (therefore smaller offer), increase cash flow and refund. The company has invested over $ 35 billion in real estate in the last year.

“It is an attractive input moment for us“, Said Kathlene McCarthy-Boldwinhead of the world real estate sector Blackstonenoting that the warehouse, rental housing and data centers are the largest prospects.

In Paris, the office Trocadéro Changed hands this summer for about € 705 million, with a buyer in Blackstone. Shortly thereafter, the Invesco assigned to Cbre the sale of the property Capital 8worth up to 1 billion euros, while in Frankfurt the gic and the Jpmorgan Asset Management proceed to the sale of the tower OPENTURM (EUR 900 million). These transactions are considered ‘barometers’ for the market.

New mobility and competition in banks

At the same time, new portfolios are also on the market. OR Brookfield examines the sale of its German student housing while Blackstone She is studying the sale of her Spanish housing activity, and both transactions are estimated to exceed € 1 billion.

The resuscitation is also due to the intense competition of banks, who are “fighting” to fund investors in logistics and homes.

“Competition drives interest rates and leverage for the benefit of borrowers“, Chris Gauhead of borrowing and funding of Cbre to London.

Problems that remain

Despite the relevant optimism, the market has not yet stabilized. Her details Msci They show that only nine transactions of more than € 1 billion were completed in the last twelve months – compared to 30 in the period until June 2022.

Investors are more cautious, as they can now achieve satisfactory yields even with government bonds, which makes real estate less attractive.
The head of Axa Im Alts, Isabel Semama, said that in terms of capital priorities, ‘First option is private faith, then the infrastructure and then the properties and the private equity“

The issue of valuations remains open: many sellers find it difficult to accept new, lower prices.

“Many owners are not ready to accept the necessary adjustments“, Explains Aew Capital Management’s Hansen Fresen. “If the buyer’s offer does not allow satisfactory performance after repayment of existing debt, the transaction is blocking“

A ‘new regularity’ is shaped

According to a survey by Expo Real organizers, 44% of professionals say they are optimistic about recovery, while 22% remain cautious. Two years ago, the majority was more pessimistic.

It is certain that the old “model” of easy lending belongs to the past. The new era will reward investors who will be actively working on their property, improving returns through management and upgrading, not just waiting for the market to climb.

“With so much volatility, we will not see quick squeezing yields as after the previous judgment“, Pimco Prime Real’s CEO, CEO Europe’s CEO Estate. “The key is the right choice and management of each property.‘