European CRE liquidity issues

It has long been our view that European CRE liquidity issues may be the most acute. In comparison with the US, CRE credit is still bank dominated, and those banks are firmly in risk off mode. Europe also has no capital markets union; cultural, legal and language barriers between countries that many lenders are not willing to navigate, and a significantly smaller private credit industry v US.

Liquidity is different from distress (though it may tip into distress if it isn’t solved); it affects performing asset classes and therefore its impact is potentially far greater than the much trailed issues in the office sector.