European property slump deepens as borrowing costs force price cuts
XLRE•European commercial property sales fell to €43 billion in the third quarter, their lowest quarterly total in three years. Higher borrowing costs are prompting deal renegotiations, with some discounts exceeding 10%.
1. Sales hit a three-year low
European commercial property sale volumes fell to €43 billion in the third quarter, the lowest quarterly total in three years, MSCI data showed. Volumes were down 3% year to date from an already sluggish 2025, while office sales dropped to their lowest since the 2009 financial crisis.
2. Higher costs prompt renegotiations
Investors, bankers and agents said rising borrowing costs are making debt refinancing harder and prompting some investors to renegotiate deals at lower prices. These re-trades are cutting prices by 2% to 3%, according to executives at M&G, while discounts can exceed 10%, an executive at a separate British developer said. DWS temporarily restricted redemptions from a property fund, Vonovia said higher rates were hurting transactions, and Land Securities and British Land paused London development projects worth more than £1 billion.
3. Financing remains available
Higher rates have made refinancing more expensive and led lenders to take a more cautious approach to leverage, debt advisers at CBRE and JLL said, although finance remains readily available for most assets. Blackstone said higher rates had slowed asset growth in Europe and the US multifamily housing market, but it expects a recovery over time.
