{"text":[[{"start":7.138,"text":"Rising interest rates are threatening to derail an already fragile recovery in global commercial real estate, with deals in the sector being hastily repriced or shelved as buyers and sellers rethink valuations."}],[{"start":20.178,"text":"Property deal volumes were expected to rebound this year, after a lacklustre period following the sharp rise in interest rates in 2022. But the inflation caused by the conflict in the Middle East and rising borrowing costs have prompted the sector to rethink deals that were struck just a few months ago."}],[{"start":37.68,"text":"“The only logical conclusion is that real estate values have to fall,” said Ronald Dickerman, president of investment firm Madison International Realty. “Let’s say you went into a handshake or a contract three months ago, and all of a sudden interest rates have backed up on you by 85 basis points. Wouldn’t you be concerned about the purchase price?”"}],[{"start":60.16,"text":"Real estate is heavily impacted by moves in long-term bond yields because much of the money used to develop projects is borrowed, with financing costs rising in tandem. The value of real estate assets has a close inverse relationship with moves in interest rates."}],[{"start":74.129,"text":"Bond yields have surged since the start of the war in Iran, pushing benchmark borrowing rates for the global economy to their highest levels since the 2000s."}],[{"start":83.447,"text":"Ten-year US Treasury yields have climbed to more than 5 per cent, up from about 4 per cent at the end of February, and hit their highest level since 2002 this month. The yield on 10-year gilts has reached as high as 5.53 per cent, the highest since 2007."}],[{"start":99.28,"text":"Several real estate investors told the FT they were trying to negotiate for deal prices to be cut by single-digit percentages. One firm said it was trying to get a 5 per cent discount on a $100mn deal agreed three months ago for an industrial asset. The scrabbling extends to smaller deals: In a recent sale for a UK warehouse, second-round bids were lower than the first round, said a person familiar with the transaction."}],[{"start":124.32,"text":"“Anyone who went under offer over the summer and needs debt to get the deal done is now trying to renegotiate,” said David Turner, co-founder of real estate adviser DTRE. “A lot of our clients are asking for price chips. That leads to some difficult decisions for vendors.”"}],[{"start":139.76,"text":"Charlie Green, chief executive of flexible office landlord Workspace, warned on Thursday that a series of asset disposals the company had undertaken would “likely take more time” due to higher interest rates and buyers making what the company believed to be subpar offers."}],[{"start":155.44,"text":"“We are disciplined sellers and will only pursue sales at prices we believe would maximise shareholder value,” he said."}],[{"start":163.286,"text":"The mood was “dire” at an industry conference in Munich earlier this month, said one real estate investment banker. “People are seriously down in the mouth about what’s going on. Everyone’s got their heads in their hands a bit. It’s a matter of when and not if deals fall apart.”"}],[{"start":180.96,"text":"Industry figures compared the current situation with 2022, when rates rose sharply in the wake of the war in Ukraine and Liz Truss’s “mini” Budget in the UK."}],[{"start":187.657,"text":"That sparked a painful market correction, as property prices fell. But real estate executives expressed concern that this time there were no near-term answers to the problems plaguing the global economy."}],[{"start":199.603,"text":"“Deals are definitely not being launched,” the banker added. “Nobody launches into the teeth of this.”"}],[{"start":208.24,"text":"Still, the industry expects robust rental growth in the residential and prime office markets, which could help partially offset the hit from higher rates. And the repricing happening now does not reach the levels seen in 2022, industry figures said."}],[{"start":219.283,"text":"Chris Pilgrim, head of capital markets at real estate adviser Avison Young, said thanks to global uncertainty, “investors are holding assets for longer, repositioning them, refurbishing them and driving rental performance for an occupier”."}],[{"start":232.88,"text":"Investors also do not want to sell assets and stomach losses. In the logistics sector, “most owners are kicking the can down the road rather than crystallising a loss. Very few are willing to sell unless they have to, so we are seeing trading volumes fall,” said Robert Taylor, head of research at DTRE."}],[{"start":250.87,"text":"New development also remains subdued, given the uncertainty. UK office construction starts rose in the third quarter of this year, with about 1.3mn sq ft of office space under way, up 23 per cent from the year before, according to data provider CoStar Group. But on a rolling annual basis, office construction starts are still hovering close to their lowest point in the past 15 years."}],[{"start":277.6,"text":"UK office building sales fell to their lowest level in a year in the third quarter, according to the data, while the time it takes to sell an office building is at its highest level since 2021."}],[{"start":287.84,"text":"Additional reporting by Ian Smith"}],[{"start":294.24,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1792393495_4824.mp3"}