Invest & Fund warns of global commercial real estate challenges
Invest & Fund has warned of upcoming challenges in the global commercial real estate market, and heralded the relative stability of domestic residential property.
The peer-to-peer property lending platform highlighted current challenges in the commercial property market globally, due to changing work habits post-pandemic, and the impact it may have on markets.
“This new work-life normality means commercial occupancy rates are falling, commercial office buildings are becoming less attractive assets for refinancing, and the values begin to fall,” Invest & Fund said in a blog post on its website.
The platform also cited analysts at Citi that have warned their clients that commercial real estate across Europe has yet to factor in the full force of rising rates meeting the demand for refinancing, and that values could fall by 40 per cent by the end of 2024.
It also cited the Wall Street Journal, which revealed that it is predominantly small and regional banks across America and Europe that hold the 2.3 trillion of commercial real estate debt. This statistic was backed up by Goldman Sachs analysts, Invest & Fund said, who state that more than 80 per cent of all real estate debt on commercial property comes from regional banks most vulnerable to the latest liquidity woes.
Invest & Fund say its asset class – residential property development finance – primarily aligns with the success of the domestic residential housing market, which could be a lifeboat for investors.
“The success of our asset class is correlated with the success of our domestic residential housing market and our domestic construction industry; it would be foolish to state there are no correlations with the broader markets; however, both sectors are relatively ringfenced from the woes described above,” it said.
Invest & Fund said it is often compared to REITs, and predicted that “an influx of investors who have been waiting for attractive entry points” may flock to P2P lending opportunities for steady returns rather than opt for trusts that are exposed to the commercial property sector.