The La Defense business district in Paris: higher interest rates and a broader tightening in financial conditions have driven up costs for office owners across Europe. Photograph: Aurelien Meunier/Getty ImagesEurope’s office market faces the toughest conditions since the financial crisis, experts have warned, as rising interest rates and a surge in building costs threaten to choke its recovery from the pandemic.
Rising base rates have added to office owners’ debt servicing costs. But that is merely the tip of the iceberg, according to Marc Mozzi, a real estate analyst at BofA. The deteriorating outlook comes after the Bank of England earlier this month delivered the biggest rise in its key interest rate in more than a quarter of a century, as it steps up the fight against inflation.
“Look at the financial crisis and what happened: the pinch points were the refinancing moments, that’s where the squeeze can come,” said Adam Goldin, head of the UK business for CC Land, the Chinese developer that owns London’s Leadenhall Building, known as the “Cheesegrater” skyscraper.