Deals Activity: Moderate
Restructuring Activity: High
Deals activity in Real Estate
1. Deal volumes have increased steadily in recent quarters as the economy emerged from the pandemic.
2. A notable slowdown in Q3 2022 may reflect challenges ahead as national and international economic volatility hits fundamentals underpinning the real estate market.
3. We anticipate deal activity will remain subdued while economic volatility is elevated.
Restructuring activity in Real Estate
The fall-out from the post-pandemic non-payment of rent was less severe than many feared, as the threat of compulsory arbitration encouraged commercial landlords and tenants to reach mutually acceptable settlements.
The current economic headwinds are placing pressure on tenants, especially in leisure and retail sectors, which in turn is increasing vacancy levels and placing pressure on yields.
Demand shifts – from reduced demand for Grade B office space through to strong performance of retail parks – are forcing real estate owners to rapidly rebalance their portfolio, potentially writing off some value. Thereby meaning commercial real estate trends are having to adapt to the new hybrid working environment have witnessed in the Post-pandemic era.
Historically low interest rates and high demand for new space has supported a strong recovery from the pandemic. Commercial space, especially retail and leisure sites, remains difficult to occupy but demand for high-quality office and residential space demonstrates strong market fundamentals. The underlying 'flight to quality' has placed pressure on owners and managers of secondary and/or underinvested sites, whether in retail, office or industrial, to make material investments or divestments. This, in turn, has led to a number of sizeable real estate transactions.
Uncertainty surrounding immediate sector prospects remains as borrowing costs rise. Financing for new developments, especially more speculative ones, may prove harder to come by, resulting in the pausing, cancelling or downsizing of certain projects.
Find Your Expert
Steve Absolom is Interpath Sector Leader for what we call the 'Infrastructure & Property' sector. This includes Real Estate as one of three core segments which is lead by Jim Tucker. For a full list of our senior people with experience in this sector use the button below.Our senior team