Returns for European property fell as office weakened

Total returns for €280 billion ($306 billion) of commercial real estate tracked by the MSCI Europe Quarterly Property Index deteriorated at the end of 2023, as falling office values dragged down the all-property performance, wrote Tom Leahy, MSCI Real Asset’ head of research, in a recent blog.

It was one of the worst calendar years on record for European property, with the rapid shift to higher interest rates causing an ongoing revaluation and a withdrawal of investment capital.

Quarterly total returns for fourth quarter 2023 weakened to -2.1 percent, for an annualized return of -4.7 percent in 2023, compared to -2.8 percent for 2022. The office sector remains under pressure, with capital values down 5 percent for the quarter and 13.9 percent the  year. A slowdown of this magnitude is on par with the loss of value recorded in 2009 amid the global financial crisis. One main