Three MSCI indexes covering listed European real estate have fallen below the March 2020 lows recorded at the onset of the Covid pandemic, the index provider said on Thursday.
On 10 October, the MSCI Europe IMI Office, MSCI Europe IMI Residential and the MSCI Europe IMI Core Real Estate Indexes all dropped below their March 2020 closes when markets were in turmoil due to the outbreak of the pandemic.
The residential index has fallen furthest below its March 2020 trough: as of 10 October, it was 16% lower.
MSCI said the latest slump reflects concerns over the energy crisis, the threat of recession, soaring inflation and rising interest rates, which have weighed on expectations for rental income and property valuations.
Despite sharp falls during the past year, the industrial and retail indexes are still hovering above their 2020 lows.
Looking ahead, conditions are set to remain challenging, the index provider said. ‘Even with inflation expected to come down significantly, central banks have indicated that further interest rate hikes are necessary, meaning that real rates look set to climb further which could continue to weigh on real estate.’