In the early days of the coronavirus pandemic, there was much talk about a wave of distressed assets hitting the market. Covid-19 did not cause that wave to break — but the moment might now have arrived.

A survey of more than 100 senior real estate professionals in the UK, U.S. and Europe found that more than 82% expected a significant increase in distressed assets being put on the market in the next year or so. The survey was conducted by consultancy firm Auxadi.

The big difference between now and the period after the first waves of the virus is interest rates.

In 2020 and 2021 governments around the world dropped interest rates and undertook quantitive easing in order to stimulate virus-hit economies. But with inflation now at 40-year highs, interest rates are rising, particularly in the U.S. and UK, to temper inflation.

As loans mature in the next few years, they will need to be refinanced in an environment where borrowing costs are much higher, which could put some loans into distress and force sales.

“Given the worsening economic climate exacerbated by the war in Ukraine, rising inflation and volatile markets, real estate investors are showing a more bearish outlook with distressed asset sales, a flight to capital safety and slower deal flow as key trends for the year ahead,” Auxadi Head of Funds Rima Yousfan said.

There will be plenty of property firms looking to take advantage of distressed assets. Data from Preqin showed that there is currently $376B of dry powder raised by fund managers targeting the sector, much of it looking for high-return opportunities.

But raising money now to take advantage of any upcoming distress is harder, Preqin said. In the second quarter of 2022 $26B was raised by funds for investment, a third less than the previous quarter and the lowest since Q3 2020.

It added that investors are shunning higher-risk strategies, whereas at the end of 2021 they were keen to put money into opportunistic funds targeting the highest returns.