News / Insights

The EPRA report highlights that the listed real estate (LRE) sector in Europe has historically outperformed most other equity asset classes during periods of falling interest rates. On average, in the 12 months following the first rate cut, LRE has historically delivered a return of 12.2%—exceeding the 5.8% return of other asset classes—while maintaining positive performance even 12 months after the end of the easing cycle. Internationally, the European LRE stands out for consistently outperforming the United States, Australia, and Japan, where returns have been more volatile.

The EPRA report also addresses the issue of debt costs: despite a 450-basis-point increase in the ECB’s main refinancing rate between July 2022 and June 2024, the average cost of debt for European real estate companies rose by only 91 basis points, thanks to effective financial management strategies. Furthermore, approximately 43% of European real estate companies’ debt is maturing between 2025 and 2027. Companies, however, are already adapting to financing conditions that are tighter than those prior to 2020, when most of these loans were issued.

With the ECB expected to ease rates in 2025, the sector is positioned for a robust recovery, supported by solid operating fundamentals, moderate debt levels, positive rental growth, and healthy financial metrics. The impact of recent rate cuts will depend on the duration and magnitude of these reductions, which are partly linked to inflation trends; in September 2024, inflation fell below 2% before rising to 2.2% in November.

A final aspect analyzed in the document concerns the performance of Listed Real Estate (LRE) compared to “direct” real estate holdings (i.e., real estate investments made directly, without the intermediation of listed instruments or funds). Structural differences, such as greater use of leverage by LRE and specific valuation methodologies, have contributed to distinct results between the two models. In conclusion, despite the difficulties of recent years—characterized by capital losses linked to rising financing costs and asset write-downs—the sector is moving toward a phase of more stable income generation, with improvements in profitability indicators such as ROE and ROA.

Read the report here