The market environment for commercial real estate financing remains challenging in the second half of the year. Geopolitical uncertainties, inflation expectations, and increased financing costs contribute to a more difficult situation. Concurrently, the refinancing requirement for numerous existing properties will reach its peak in 2026. This situation was analysed during an online press conference by Rueckerconsult, attended by significant representatives from the real estate and finance sectors.
The expert panel, comprising, among others, Prof. Dr. Felix Schindler of HIH Invest, Stefan Hoenen of Hamburg Commercial Bank, Fabio Carrozza of BF.direkt AG, Torsten Hollstein of CR Investment Management, and Alexander Lackner of neworld, stated that despite initial signs of stabilisation, the interest rate turnaround, reduced property values, and substantial refinancing requirements are exerting considerable pressure on older financings. Calculations by HIH Invest show that commercial property financings amounting to over 40 billion EUR will expire in 2026, causing the refinancing gap to increase to over six billion EUR.
Office properties are particularly affected, as both transaction activities before the interest rate turnaround and the subsequent value corrections have been most pronounced in this segment. Prof. Dr. Felix Schindler, Head of Research & Strategy at HIH Invest, noted that the peak of refinancing requirements in 2026 coincides with a significantly higher interest rate level and lower property valuations. This leads to a noticeable increase in security and equity requirements for refinancing for investors.
Differentiation in the financing market
In addition to increased financing costs, falling market values make follow-up financing for many properties particularly difficult. Debt-to-equity ratios have risen significantly in numerous cases, prompting financiers to demand additional collateral or equity injections. Experts do not foresee a classic credit crunch but rather an increasing differentiation between properties that are easily financeable and those whose financing proves difficult.
Stefan Hoenen, Head of Commercial Real Estate at Hamburg Commercial Bank, explained that banks are generally willing to finance, but the market is bifurcated. There is high interest among various market participants in refinancing fungible assets, especially in the Core segment, where conditions are favourable for clients. However, this category only comprises a small part of the overall market. For many other properties, the situation is significantly more difficult, with quality, location, letting situation, and the investor's experience being decisive.
- —Residential properties
- —High-quality commercial properties in established locations
- —Properties with stable cashflows
Financing properties with structural risks, weak occupancy, or increased repositioning needs proves more challenging. Here, alternative financiers and credit funds are increasingly gaining importance. Fabio Carrozza, CSO of BF.direkt AG, observes that funds are utilising financing opportunities in individual market segments that traditional banks currently cannot cover. This opens up financing possibilities for properties that are fundamentally viable but no longer fit every bank's criteria.
Long-term perspectives and existing property financing
Despite possible short-term signs of easing in geopolitical conflicts, the structural challenges of the real estate market will persist. Prof. Dr. Felix Schindler emphasised that while a détente could reduce uncertainty in capital markets, sustainable recovery requires more planning certainty regarding geopolitical conflicts, inflation and interest rate developments, and international trade relations. It is noteworthy that foreign investors often assess the German market more positively than many domestic market participants, who increasingly view the current market dislocations as an entry window, while the German institutional market acts cautiously due to tied-up capital.
Another key discussion point concerned the high number of existing financings whose underlying problems have so far merely been postponed. Restructurings, prolongations, and additional equity requirements will occupy the market for several more years, according to experts. Alexander Lackner, CEO of neworld, pointed out that the biggest challenge currently lies not in new business but in existing portfolios. The market has adjusted to a permanently higher interest rate level, but price discovery and adaptation to new market conditions have not yet been completed for a large part of existing financings and properties. This pent-up refinancing need represents the actual "white elephant in the room," as many problems have been deferred through prolongations or interim solutions until now.
