Mathew Crowther, the senior portfolio manager in the European high-yield debt fund series for PGIM's real estate business, spoke to CoStar News senior reporter Chanté Bohitige and sister publication Business Immo's Luc-Étienne Rouillard Lafond.
In conversation about debt and the current, more confident, state of the market, especially compared with 2022-23, he said:
"So I think the easing of interest rates in Europe, you know, back to around the 2% level, we've seen some easing in the UK. We would have hoped that would progress a bit more.
"But certainly those calming of interest rates and the more certainty around valuation was what created that confidence in the lending space.
And we hope what was happening the last few days [in the Middle East], you know, doesn't impact too much that sort of easier run we were hoping for in this space."
Bohitige asked: "Already specialists in financing and debt markets, including yourself, are saying that 2026 is a particularly attractive moment in the debt cycle. With that in mind, what has shifted most materially do you think over the last six months to unlock deal flow?"
"I think it's let's just look at real estate fundamentals to start with. So as I said, you know, our view would be real estate values generally in Europe are probably about 20% below trend. So I talked about that 25-30% market correction. in terms of global asset class, right, real estate looks really quite, you know, fairly valued. We've had that sort of, you know, fundamental shift and it looks well valued.
"I think the other huge opportunity for Europe is the lack of supply.
"So in our view over the next say three to four years, we expect supply of new real estate in Europe to be at its lowest level in almost 40 years, right. This market shock has meant that we've got, you know, not enough capital's gone into building real estate.
"So to the extent we can support that through our debt programme, we know we're building brand new stock, good quality, it's where the tenants want to be and it should be very liquid and financeable or sellable in the market. So I think that has been where our focus has been."
He went on to talk about how "we are in an income world right now" and how fast the debt market is recovering compared with the equity market. For those discussions, click on the play button above.