Real estate named ‘most distressed sector’

The European real estate market is the most distressed sector across Europe, research suggest.

The latest Weil European Distress Index suggests the property sector continues to face significant distress, with falling investment metrics and high interest rates posing challenges. 
Restructuring firm Weil analyses data from more than 3,750 listed corporates and financial market indicators to assess how vulnerable businesses are.

It found that leveraged firms in real estate are grappling with rising costs, declining property values and refinancing complexities due to tighter liquidity and depreciating valuations.
 
A notable concern arises from corporate debt refinancing, particularly for businesses reliant on significant capital investments or facing imminent refinancing needs, the research warns.

It said these challenges are further compounded for smaller enterprises that typically have lower credit ratings and are therefore more vulnerable to interest rate increases. 

This sensitivity to rate hikes, combined with tighter liquidity conditions, is placing significant strain on their ability to manage debt and sustain operations.

Andrew Wilkinson, senior European restructuring partner and co-head of Weil’s London restructuring practice, said: “Whilst some sectors show signs of recovery, distress levels remain comparatively high. 

“With the current macroeconomic indicators presenting a more nuanced picture than previous forecasts, we can expect capital-intensive and highly leveraged businesses to continue to feel pressure. Those operating in the industrials, retail and real estate sectors are bearing the brunt of these pressures.

“Businesses able to adjust their capital investment strategies will fare better in weathering the storm.”