Real Estate Debt New opportunities through a hybrid financing environment
13.04.2026 • 5 Reading Time
The interest rate environment has been a decisive factor for real estate investments in recent years. The 2022/23 interest rate shock was followed by a phase of uncertainty, finally the gradual rate cuts to a level of two per cent for key rates in the euro area, which was last stable and was categorised as “neutral rate” or even “new normal” by most market participants after the years of very low interest rates. Ultimately, this also led to greater confidence in the property markets.
However, with the increases in oil and gas prices caused by the war in Iran, uncertainty about future inflation and interest rate developments is now growing again. But beyond such short-term observations, the financing environment for real estate investments has changed sustainably in recent years: It has become more complex, more diverse, more competitive - and perhaps also more resilient?
Even before the war in Iran, there was no return to old patterns, but rather a broader and more heterogeneous market picture. Traditional banks are and remain important financing partners. However, they act selectively and cautiously, not least due to regulatory reasons, and no longer take every risk and every loan expiry with them. As is often the case, this represents both a challenge and an opportunity for investors.
However, with the increases in oil and gas prices caused by the war in Iran, uncertainty about future inflation and interest rate developments is now growing again. But beyond such short-term observations, the financing environment for real estate investments has changed sustainably in recent years: It has become more complex, more diverse, more competitive - and perhaps also more resilient?
Even before the war in Iran, there was no return to old patterns, but rather a broader and more heterogeneous market picture. Traditional banks are and remain important financing partners. However, they act selectively and cautiously, not least due to regulatory reasons, and no longer take every risk and every loan expiry with them. As is often the case, this represents both a challenge and an opportunity for investors.
Initially, lending for commercial real estate remains limited, with higher margins and higher capital requirements shaping conditions in many places. Many existing investments are also currently facing expiring financing and therefore extensions under significantly changed conditions than five or ten years ago. The need for refinancing is currently high, particularly in the high-volume office segment.
However, the diversification of financing sources has increased in the meantime. Alternative investors are becoming more prominent, including institutional investors such as insurance companies with direct lending options or specialised debt funds or private credit providers, who raise institutional (and now also private) capital for real estate debt investments. Institutional investors will have received more and more corresponding offers in recent years, although there have also been isolated difficulties from an investor’s point of view (especially in the retail segment). Mezzanine capital continues to be present on the market and is sometimes a rescue anchor in critical financing situations.
From an investor perspective, this has created a financing market that offers more options than it did a few years ago. In addition to classic senior loans, alternative debt structures and supplementary mezzanine modules are now also available. At the same time, requirements have changed. Investors are paying greater attention to robust financing structures, more conservative assumptions in underwriting, more equity, more stable cash flows and high asset quality.
However, the diversification of financing sources has increased in the meantime. Alternative investors are becoming more prominent, including institutional investors such as insurance companies with direct lending options or specialised debt funds or private credit providers, who raise institutional (and now also private) capital for real estate debt investments. Institutional investors will have received more and more corresponding offers in recent years, although there have also been isolated difficulties from an investor’s point of view (especially in the retail segment). Mezzanine capital continues to be present on the market and is sometimes a rescue anchor in critical financing situations.
From an investor perspective, this has created a financing market that offers more options than it did a few years ago. In addition to classic senior loans, alternative debt structures and supplementary mezzanine modules are now also available. At the same time, requirements have changed. Investors are paying greater attention to robust financing structures, more conservative assumptions in underwriting, more equity, more stable cash flows and high asset quality.
Our Assessment
The financing market has become more diverse and, at the same time, more professional. From an investor’s perspective, this is a positive development, even if it sometimes increases the complexity of structuring deals. However, it provides greater flexibility and more resilience in the face of external challenges. In the long term, there are many arguments in favor of a hybrid financing market. It is also clear, however, that traditional banks will continue to be by far the mainstay of the market.