European CMBS 2025 Outlook: Turning the Corner

With interest rates on a downward trend, the European commercial real estate (CRE) market may have turned a corner, but the road ahead looks still bumpy and the market value decline experienced by some properties in the last few years seems to be permanent.

Key highlights include:
-- We confirm our relatively positive view on the retail sector, which is drawing renewed investor interest following the significant repricing in the last years.
-- The growing role of private credit may open opportunities for the commercial mortgage-backed securities (CMBS) market to consolidate its position as alternative source of CRE funding in Europe.
-- We expect investors to continue focusing on sectors with strong market fundamentals, such as the private rented sector and logistics.

"From a European CMBS perspective, 2025 looks less challenging than 2024, with only a small number of transactions reaching their final maturity", said Mirco Iacobucci, Senior Vice President, Sector Lead, European Commercial Real Estate Ratings. "However, the credit and rating outlook for the office sector remain negative and we would still see most of the risks in our surveillance portfolio concentrated in this asset type.