The market has reset. Many balance sheets have not

German commercial real estate is approaching the busiest refinancing year of the current cycle, with more than €40bn in loans maturing in 2026 — and most of that debt was priced when interest rates were a fraction of today's levels. The resulting financing gap could exceed €6bn this year alone, according to new research presented at a RUECKERCONSULT webinar last week.

Prof. Dr Felix Schindler, Head of Research & Strategy at HIH Invest, modelled the scale of the problem using transaction data stretching back to 2014. Loans maturing in 2026 carry an average interest rate of just 1.08%. Refinancing today, with ten-year swap rates near 3% plus a typical 100 basis point margin, pushes financing costs towards 4% — roughly three percentage points higher than when the original loans were written.

Schindler's worked example shows what that means for loan-to-value ratios. Take an office property bought at a 3% net initial yield, valued at €12,000 per square metre, with 50% leverage. Even assuming 10% rental growth, a market yield shift to 4.5% cuts the capital value to €8,800 per square metre — a loss of more than 25%. The bank's €6,000 of debt stays fixed, but equity absorbs the entire loss, falling to €2,800. Loan-to-value jumps from 50% to 68%, often breaching covenants and forcing borrowers to inject fresh equity at refinancing.