CREFC Europe Q4 sentiment survey: Real estate debt industry mood lifts but concerns persist

Europe’s real estate finance professionals feel moderately more optimistic than they did last quarter, although they still have underlying concerns about conditions for their market, according to the results of CREFC Europe’s Q4 sentiment survey.

The sentiment index scores that the industry body calculates based on its findings show sentiment remains largely negative in Q4, albeit to a lesser degree than in the previous quarter.

“It is a better quarter than Q3 in terms of sentiment, which is not surprising, given the more positive news on the economic side,” says David Dahan, industry initiatives director at CREFC Europe.

“The industry is responding to messaging from central banks that there may not be too many more interest rate hikes, as well as the news that inflation is starting to be reined in, and diminishing fears of a US recession.

“Indicators look more positive across the survey results this quarter, relative to last quarter. They are still in negative territory, but there is an improved picture.”

Dahan notes that the sentiment index score for respondents’ views on overall market conditions has risen from -0.51 in the Q3 survey to -0.32. UK-based respondents were the key driver for the uplift in the score, with the index for that market rising from -0.59
to -0.2.

“The big driver for the UK is the economic outlook. There is a big change in the number of people who think it is moderately better,” says Dahan. “That seems to be driven by the belief that there is more liquidity, which could lead to more transactions. There are, however, still concerns about the financial covenants of existing loans, and sentiment hasn’t shifted on that.”

Respondents across the survey indicated a more positive outlook on the macroeconomic environment, with the Europe-wide sentiment score increasing from -0.61 in Q3 to -0.39 in the latest survey, with UK sentiment showing the most improvement.

Continued office woes

The outlook for real estate market fundamentals was also improved across the survey, with the sentiment index score up from -0.6 to -0.4 in the most recent two surveys.

“Drilling into the individual sectors, there is an improved picture except for office,” says Dahan. “The gap in sentiment between office and the rest is widening, and this survey was conducted before the WeWork bankruptcy. Sentiment around office is at its lowest point since we launched the survey five years ago.”

Dahan says the change in sentiment towards office is most evident in the reduction in the number of respondents saying there was no change in their outlook and the increase of those indicating they were moderately more pessimistic in Q4.

Meanwhile, responses to CREFC Europe’s questions about risk appetite were relatively unchanged from the previous quarter, Dahan notes, indicating that property lenders remain cautious about how high up the capital structure they will lend, the sectors in which they will provide financing, and the locations of the assets they are willing to back.

Describe in a few words how you feel about the market

“Standby mode. Geopolitics has swamped other conventional metrics”

“Waiting for some distress from the ‘Great Wall of refinancing’ next year”

“Volatile. The phenomenal increase in the price of debt has caught out the market”


“Increased need to sort out existing deals and focus on exit strategy”

“Still in flux but there appears to be some settling and realisation to where values need to reset”

“Opportunity for the future if you are not inhibited by the past”

“Near the trough with some rays of light”

“Getting better for non-banks”

“Uncertainty is subduing market activity but also some stockpiling of capital ahead of [an] expected interest rate peak and market recovery”