- March 1, 2020: Vol. 14, Number 3

To read this full article you need to be subscribed to Institutional Real Estate Europe

The problems with the euro — part III: Ignoring euro-zone risk can be dangerous to your wealth

by Randall Zisler

As maintained in the second part of this series of articles (see pages 27–30 of Institutional Real Estate Europe January 2020), investors in the euro zone should appreciate certain risks that the euro itself introduces.

These structural risks can profoundly affect real estate performance through various transmission channels that include the exit cap rate, rental growth and tenant default. The effect can be particularly acute for value-add and opportunistic investments.

The euro zone’s economic structure consists of fixed exchange rates, free cross-border capital flows, and lack of sovereign monetary autonomy. Euro-zone nations typically lack the resources to fund countercyclical measures or support a strong social safety net. The European Commission is loath to redistribute financial resources from rich to poor nations. Hence, each euro-zone nation, which is left to its own devices during a downturn, risks bearing severe asymmetric shocks.

A nation

Forgot your username or password?

We use cookies and other tracking technologies to personalize your user experience on our site and perform site analytics. By clicking on “I accept”, you consent to our Privacy Policy.