Real estate debt funds face their day of reckoning

As Europe’s economic mood sours, a sharp rise in interest rates is putting commercial real estate through its first big cyclical turn since 2008. The non-bank sector, which has become a vital enabler of funding at higher leverage, now faces a test of its resilience.

Like a cruise ship docked between King’s Cross train station and the Eurostar terminal, Google’s vast new London headquarters is nearing completion in one of Europe’s best-connected locations. Complete with solar panels and rotating timber blinds, the so-called ‘landscraper’ will have a 300-metre-long garden on the roof, a swimming pool, a games room and space for 700 bicycles.

Alas, not all of London’s commercial real estate market is like this.

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