𝗘𝘂𝗿𝗼𝗽𝗲’𝘀 𝗖𝗼𝗺𝗺𝗲𝗿𝗰𝗶𝗮𝗹 𝗥𝗲𝗮𝗹 𝗘𝘀𝘁𝗮𝘁𝗲 𝗥𝗲𝗰𝗸𝗼𝗻𝗶𝗻𝗴: 𝗗𝗶𝘀𝘁𝗿𝗲𝘀𝘀 𝗕𝘂𝗶𝗹𝗱𝘀 𝗶𝗻 𝗚𝗲𝗿𝗺𝗮𝗻𝘆 𝗮𝗻𝗱 𝗙𝗿𝗮𝗻𝗰𝗲

Europe’s commercial real estate (CRE) sector is under mounting pressure, particularly in Germany and France. Commercial property sales fell by 22% in Germany and 45% in France in mid-2024, amid rising vacancy rates and refinancing pressures.¹

Once considered among the continent’s most stable markets, these countries are now grappling with surging vacancy rates, falling property valuations, and increasing investor caution. As CRE loan books come under scrutiny, the cracks in Europe’s real estate financing model are widening.

The collapse of Austria’s Signa Group in late 2023 was a watershed moment. Once a €25 billion real estate empire, Signa's bankruptcy revealed the fragility of its funding model. Despite holding €5.3 billion in liabilities, much of its debt was tied up in project-level SPVs and short-term bridge loans — backed by assets with limited income and uncertain valuations. As market liquidity dried up, this structure proved unsustainable.²

Germany, traditionally known for conservative lending, now finds itself deeply exposed. Office vacancy rates across Germany’s seven largest cities averaged 7.4% in Q1 2025, with Berlin among the key contributors.³ In the Greater Paris Region, vacancies exceed 10.5%, up from 8.6% a year earlier.⁴ Rising interest rates have compounded valuation challenges, reducing landlords’ ability to refinance maturing debt without injecting new equity or facing distressed asset sales.

European banks have responded with forbearance — extending maturities, restructuring loans, or moving assets into non-core portfolios. But balance sheet pressure is building⁵

A large volume of European CRE debt is due by end-2025, creating refinancing strain⁶ and advisors across Europe report a sharp uptick in restructuring mandates. Trophy assets — especially offices, retail complexes, and logistics hubs bought at peak pricing — are now being handed back to lenders or sold at discounts. Lenders, in turn, must navigate between restructuring, asset sales, and provisioning.

Central banks remain caught between curbing inflation and protecting financial stability. While there’s pressure to ease interest rates, premature cuts could fuel risk-taking. Conversely, holding rates steady may accelerate more borrowers into technical default.

As borrowers, banks, and policymakers wrestle with these conflicting pressures, the question for restructuring professionals is clear: how to unwind CRE exposures in a way that avoids systemic disruption while preserving asset value?

Sources: 1 Finimize | 2 FT | 3,4 JLL | 5 Reuters | 6 CBRE

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