German banks anticipate continued challenges in the commercial property sector. A rapid recovery is currently deemed unlikely by the institutions. Although a stabilisation or slight decrease in the share of non-performing loans in portfolios is expected, the market environment remains volatile, according to the surveyed workout managers. This is derived from a current study by Roland Berger.
For the study, workout managers from leading German banks were surveyed, whose cumulative commercial real estate loan volume exceeds EUR 110 billion. The European Banking Authority reported the so-called NPL ratio (Non-Performing Loans) in the German CRE segment (Commercial Real Estate) as 6.91 percent at the end of last year. This accounts for over 30 percent of the EU-wide volume of non-performing real estate loans attributable to Germany.
Market Forecasts and Problem Segments
Expectations for the German commercial property market are nuanced. 45 percent of respondents anticipate a slight deterioration for the years 2026 and 2027, while 26 percent expect a stabilisation and 29 percent a slight recovery. Accordingly, none of the survey participants expect a significant market recovery. Office properties remain an explicitly critical area. All respondents foresee the most pronounced increase in credit risks and the largest price declines in this segment by the end of 2027.
Retail properties also continue to be under pressure. 71 percent of respondents identify retail financing as a significant risk segment; 88 percent expect further price declines in this area. Banks primarily rely on restructuring with borrowers to reduce non-performing loans, a strategy favoured by 96 percent of institutions. Furthermore, property sales (67 percent) and the sale of individual NPL exposures (56 percent) play a role. However, the implementation of these measures is hampered by low market liquidity, low sales prices, and complex financing structures. Internally, banks cite the complexity of engagements (70 percent) and limited staffing capacity (64 percent) as key hurdles.
Solutions and Available Capital
Roland Berger advocates for proactive, data-driven NPL management. This requires clear criteria for restructuring, sale, or alternative solutions. Professional holding companies and trust models are mentioned as potential instruments for relief. These can help to stabilise problematic real estate projects, implement value-enhancing measures, and postpone sales. According to Roland Berger, significant capital, referred to as relevant dry powder, is available for German real estate. This amounts to approximately EUR 79 billion, of which about EUR 37 billion comes from private equity and EUR 42 billion from private credit.
