European Commercial Market Down But Opportunity Remains

The US subprime mortgage crisis, softening demand for housing, and more attractive prices for US REITs didn’t take long to affect REITs in Europe. The Wall Street Journal reports that European commercial real estate share prices dropped by 11% in the second quarter.

During this time the cost of credit swaps increased 63 basis points to 6.1% which resulted in capitalization rates increasing 50 basis points. Overall leasing demand generally remains strong and so it is anticipated that opportunities remain while some markets such as the UK and Spain have possibly reached a peak and are also facing an increase in supply.

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