New research from Bloomberg Intelligence has found that the seven-year underperformance of European REITs still looks unstoppable in 2023. 

Susan Munden, senior real estate analyst at Bloomberg Intelligence, said: “We’ve analysed property-value resilience, low leverage and strong management as key REIT attributes in assessing if the seven-year performance drought can end in 2023, or whether property values will tumble (as share prices suggest). As there’s scope for large swings in individual share prices, stock selection is key. 

“The seven-year underperformance of Europe's real estate industry vs. the Stoxx 600 Index may struggle to reverse in 2023, though a major bounce is an upside risk if interest rates pivot. Timing may be telling, as property-value changes are only disclosed twice a year. 

“However, if interest rates look set to continue higher, a bounce is unlikely. For REITs, an economic soft landing may indicate higher terminal interest rates, but greater rental values if accompanied by GDP growth. A hard landing cuts rates, but a protracted recession - such as that flagged for the UK - could curb rental growth and lift vacancy rates.”