Lender sentiment remains subdued in Germany despite positive shifts

Despite an uptick in new lending and a decrease in non-performing loans (NPLs), sentiment among commercial real estate lenders in Germany remained cautious during Q1 2026.

Germany

According to the newly redesigned BF.Quartalsbarometer, a collaboration with the Handelsblatt Research Institute, the survey conducted in mid-March, reflecting awareness of the war in Iran, revealed a recalibrated barometer score of -9.74 points, indicating generally limited financing willingness. A significant 27% of respondents reported a deterioration in financing conditions over the past three months, while 68% observed stability, and only 5% noted an improvement.

In terms of new commercial real estate lending, nearly 73% of lenders experienced stagnation, though over 27% saw growth in their business volumes. The competitive landscape showed a similar pattern, with roughly three out of four respondents reporting no quarter-on-quarter change, while the majority of the remaining 25% noted increased market competition.

Demand for alternative financing instruments has grown since Q4 2025, according to 41.2% of respondents, with real estate private equity (e.g., joint venture equity) being the most sought-after.

Regarding non-performing loans, 32% of respondents indicated a decrease in NPL ratios since the previous quarter, compared to only 18% reporting an increase. For 41%, the ratio remained flat.

Property development financing saw an average margin of 262 basis points (bps), though actual margins varied widely from 110 to 800 bps. Residential real estate development commanded the highest average margins at 309 bps, while logistics warehouses had the lowest at 201 bps. The average loan-to-cost ratio for property developments stood at 71.32%.

For existing real estate financing across all property types, the average margin was 169 bps. Residential real estate had the lowest average margin at 144 bps, whereas office real estate financing was at the higher end with an average of 181 bps. The average loan-to-value ratio for existing real estate financing across all use types was 63.52%.