Curzon/AEW sees European credit squeeze deepening

The fallout of the sub-prime mortgage crisis in the US may stifle investment activity in the European commercial real estate market for the remainder of this year and cause casualties among highly-leveraged players as banks tighten credit lines, according to investment manager Curzon Global Partners.

'The US commercial real estate market is shutting down and it is unlikely that Europe will be immune from the impact of the crisis as one very rarely gets this level of volatility without distress and dislocation,' said Curzon CEO Ric Lewis. 'We hope that there is just a brief liquidity squeeze that takes the froth off the market, but this should be a wake-up call to investors,' he added.

Highly leveraged players run the greatest risk of being affected by the credit crunch, said Simon Martin, managing director and head of research and strategy at Curzon. 'Leveraged marginal players who no longer have capital to deploy might find themselves under pressure from shareholders and may have to wind up as their share prices fall. If liquidity dries up and bid/ask spreads open, the market could get very quiet. I think we could be in a situation such as the late 1980s and 1990s where everybody is waiting for the end of year valuations to come in and activity simply dries up in the final quarter,' he added. `

See also our article on the credit crunch in the September issue of PropertyEU.