European property slump deepens as higher borrowing costs force price cuts
BX•European commercial property sales fell to €43 billion in the third quarter, their lowest quarterly level in three years, while office sales reached their lowest since the 2009 financial crisis. Higher borrowing costs are prompting deal renegotiations, with some discounts exceeding 10%.
1. Sales and prices weaken
European commercial property sales 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, and office sales were the lowest since the 2009 financial crisis. Investors, bankers and agents said rising borrowing costs were making refinancing harder and leading some buyers and sellers to renegotiate deals at lower prices.
2. Developments put on hold
Land Securities shelved its £1.5 billion redevelopment of Lewisham shopping centre, citing higher rates, construction costs and local authority demands for more affordable housing. British Land paused the second phase of its £4 billion Canada Water redevelopment due to economic conditions but remains committed to it long term, a person familiar with the matter said. Land Securities and British Land had also paused two major redevelopment projects this month.
3. Investors face pressure
M&G executives said re-trades were cutting prices by 2% to 3%, while an executive at a separate British developer said discounts could exceed 10%. DWS temporarily restricted redemptions from a property fund, and Vonovia said higher rates were hurting transactions and it would review its developments business. Blackstone said asset growth had slowed in Europe and U.S. multifamily housing, though it expects recovery over time.
