IREBS
IREBS at the Vielberth Building, University of Regensburg
German banks are fighting over the few good property deals whilst avoiding the bad ones at any cost. The latest IREBS German Debt Project, surveying 20 banks representing €250 billion in lending, reveals what the researchers call “more competition in a quiet market.”
The 13th annual study from the University of Regensburg, managed by Prof. Dr. Tobias Just, shows financing markets still under pressure, despite being more stable than during 2008. Geopolitical uncertainty, regulation, and structural changes are reshaping lending, whilst banks are facing growing competition from alternative financiers.
Competition for low-risk financing has intensified, pressing margins on stable assets even lower. At the same time, banks are still imposing high premiums on problematic properties, particularly developments and offices in secondary locations. This bifurcation reflects lenders’ caution in an uncertain market. Residential property remains the most sought-after asset class, followed by logistics, while sentiment toward hotels and retail has brightened after years of gloom.
The real pressure point, however, is the looming maturity wall. Loans maturing within one year have reached their highest level in the German Debt Project’s history. Short-term lending has never been so prevalent, and with transaction volumes weak, refinancing options for borrowers are limited. This threatens to keep non-performing loans elevated across both commercial and residential sectors. Highly leveraged owners face particular risks: without functioning transaction markets, they may be forced into fire sales or costly loan extensions.
Regulation is adding another layer of strain. While macroprudential controls have eased slightly, banks continue to see the overall regulatory burden as a handicap. The result is what the researchers describe as “regulatory arbitrage”: debt funds and other non-bank lenders gaining an advantage by operating under lighter regimes. Combined with rising technology investment costs, this dynamic is keeping consolidation pressure high, particularly on smaller lenders who struggle to shoulder the compliance burden.
Signs of recovery are visible — but clouded. Leading indicators such as interest rate trends and market sentiment suggest a possible upturn, yet lagging factors continue to weigh heavily. Elevated non-performing loans and the pile of loans falling due create headwinds that could mute any recovery. Still, banks are showing greater resilience than in earlier crises, with stronger balance sheets, better data quality and more sophisticated risk management than in 2008.
These findings were presented in Frankfurt on 16th September, where Dr Jan Peter Annecke of Helaba, Dirk Brandes of Natixis, Sven Carstensen of Bulwiengesa and Jens Tolckmitt of the Association of German Pfandbrief Banks discussed the results. Their debate underscored how regulatory pressures, competitive dynamics, and fragile recovery signals interact to shape today’s financing landscape.
Despite the ongoing weakness, many bank representatives expect consolidation among lenders to accelerate, driven both by regulatory cost and by competition from non-banks. Asset class preferences remain defensive: residential financing continues to dominate, logistics follows on the back of e-commerce and supply chain resilience, and hotels and retail are tentatively regaining lender confidence.
The German Debt Project, supported by the VdP and sponsors including Bulwiengesa, CREFC, INTREAL, MSCI and ZIA, has become the benchmark transparency tool for commercial real estate financing in Germany. This year’s results, based on €250 billion of loans, underline the split in lending terms: quality assets are benefiting from intense competition and favourable conditions, while secondary properties face punitive margins.
REFIRE: The lesson for investors is clear. Banks are desperate for quality deals, but charging hefty premiums for everything else. With short-term debt at record highs and many borrowers facing refinancing hurdles, distressed opportunities are likely to emerge. Smart money will be watching the maturity wall closely. As non-bank lenders exploit regulatory arbitrage, institutional investors should have alternative debt sources ready — not when the crunch arrives, but now.