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The refinancing gap that German real estate has anticipated since early 2024 is no longer theoretical. But the market’s response is more nuanced than the binary “credit crunch” narrative suggests. According to a panel of financiers and workout specialists gathered in mid-February for a RUECKERCONSULT web conference, capital remains available — just not at yesterday’s prices or underwriting standards.
The gap is less about missing liquidity than about capital refusing to subsidise assumptions formed under a different rate regime.
Torsten Hollstein of CR Investment Management delivered the bluntest assessment. The refinancing difficulties predicted for 2026 are materialising across the market’s breadth: borrowers seeking extensions, projects delayed indefinitely, and a growing population “in limbo” unsure whether refinancing will materialise.
Hollstein compared the situation to the mounting tension aboard Das Boot: not a sudden rupture, but the constant creaking and stretching of joints as the vessel runs deep under pressure. Distressed situations now represent roughly two years of current transaction activity, compared to one year historically. “The submarine will stay underwater through 2027,” he predicted.
Sascha Baran of PTXRE estimated the refinancing gap at over €20bn. In a market where annual transaction volumes have only recently recovered into the €30bn range, that is not marginal dislocation. It is a material overhang requiring recapitalisation, asset sales or valuation adjustment.
Banks, he noted, are not retreating but filtering more aggressively. Exit strategy, NOI coverage and asset transparency “simply have to fit”. The story must be “good and stable” — not merely plausible.
Stefan Hoenen of Hamburg Commercial Bank illustrated that selectivity. HCOB plans around €1bn in new lending for 2026, but within sharply narrowed parameters: Germany only, top seven cities plus logistics, and sponsors with demonstrable track records and institutional asset quality.
The constraint, Hoenen argued, is not capital shortage but a shortage of realistically priced assets that meet current risk-adjusted return requirements. Banks have retreated to core competencies after years of looser, capital-market-driven underwriting.
Michael Morgenroth of CAERUS Debt Investments framed the divide in two parts. One financing gap reflects outright value destruction rendering projects unfinanceable. The other reflects adjustment from past financing conditions to today’s pricing reality. “There is enough capital,” he noted, “but not at the conditions many investors were used to.”
Core assets in prime locations with experienced operators can still secure competitive terms. Secondary assets, peripheral locations and unproven sponsors face materially higher costs or limited availability. In development finance, the €100m threshold increasingly separates institutional from opportunistic capital.
Capital is selective, not scarce
Development finance is institutionalising further. Opportunistic traders with minimal value-add strategies face constrained access. Professional developers with track records and credible exit strategies can still obtain financing, but with higher equity and tighter structures.
Banks are favouring bilateral workouts over large-scale NPL portfolio sales. Fewer distressed transactions than anticipated reflect negotiated extensions rather than market health.
This approach buys time but ties up capital and increases complexity. If absorption remains limited, delayed recognition risks more concentrated pressure later.
The refinancing cycle is acting as a sorting mechanism. Access is determined less by sector than by asset quality, sponsor credibility and pricing realism.
Regulatory headwinds reinforce repricing
Repricing is reinforced by regulation. As Hoenen cautioned, Basel IV will remove banks’ ability to use internal models for development risk, treating project finance as uniformly high-risk exposure and raising capital requirements and margins.
Early-stage projects will be particularly affected. Even high-quality developments will face structurally higher financing costs once the framework is fully implemented.
Credit funds are expanding market share, but not as lenders of last resort. Institutional capital backing private credit applies similar asset filters, albeit with different return targets. Speed and structural flexibility are advantages; tolerance for weak fundamentals is not.
Geopolitical and domestic political uncertainty elicited little alarm. As Morgenroth observed, “all the black swans are now swimming on the pond.” The improbable has become visible — and largely priced.
The refinancing landscape resembles a permanently repriced equilibrium rather than a temporary freeze. Core assets with institutional sponsors retain access. Secondary assets operate in a higher-cost environment with narrower margins for error. Development financing persists, but only with stronger equity, clearer pre-leasing and institutional execution.
The market is not seizing up. It is differentiating. If valuation realism lags, the €20bn overhang will force resolution through disposals rather than extensions. The refinancing cycle is not freezing German real estate. It is redrawing the capital map.