What's going on?

Investors have ditched Europe�s commercial property market, a breakup that could keep the sector in the dumps for a while.

What does this mean?

Europe�s commercial property market has been put through the wringer, with high interest rates weighing on the sector�s valuations. Naturally, then, investors have been ditching related funds and putting their cash into assets that are benefiting from rising rates instead. Case in point: investments in European commercial real estate were down 59% in the first half of this year versus the same period last year. That�s a problem: the lack of interest may force funds to sell off the property investments they own, which could force prices in the property market ��already posting double-digit dips ��down even further.

Why should I care?

For markets: It�s a hard-knock life.
It�s no wonder European property funds are trading for far less than they�re worth. Existing investors are jumping ship in case property prices drop again, and new rules in France and Germany that force traders to hold cash in funds for a set period of time are putting off any new would-be investors. And to make matters worse, the same rising rates that are depressing property prices are also making it more expensive to pay back debt ��something property funds have buckets of.

The bigger picture: A long game of limbo.
The worry about interest rates isn�t necessarily how high they go, but how long they stay there. If rates stay high for a long time, a whole bunch of investments will end up winded. Stocks included, as high rates bring down company valuations and the value of their future earnings. So here�s the twist: European property could actually be a safer bet since its low demand and high risk has likely already been accounted for in investments� prices, taking some of the guesswork out of the equation.