Banking pressure and pension capital will reshape property markets

Andreas Walter, partner and attorney at law at German boutique firm Yester & Morrow, says Europe’s real estate market is approaching a decisive turning point as refinancing pressure builds and regulatory reforms unlock new sources of long-term capital.

Speaking to Real Asset Media, Walter said prolonged market inertia since 2024 is nearing its end.

“In 2026, we are going to see a market movement. We’ve seen a standstill in the market for 2024–2025 because the refinancing. We had a record high refinancing rate which has not taken place. The can was kicked down the road. The banks didn’t refinance. There was no pressure from the banking side on the lenders. We think this is going to shift, because as the first one within the line is going to fall, then it’s going to have a huge impact on the overall market,” he said.

He explained that lenders have so far been able to defer difficult decisions by relying on existing credit assessments, provided borrowers maintained sufficient cash flow.

“There even is a legal reasoning for that, because the banks can prolong on their old assessments, even if it’s a soft breach, as long as the capital flow is there,” he said.

He warned that this flexibility is now fading.

“Now, once that changes, they need to go into a new assessment. We think 2026 is going to be the year when, for the first time, there’s going to be pressure from the banking side on the real estate sector to refinance,” he said.

Walter also highlighted major changes in Germany’s regulatory treatment of fund structures, which he believes will reshape institutional investment.

“Well, from the positive side, on the other hand, what we are currently seeing is a paradigm shift in the way the legislature actually treats the regulation on the fund sector,” he said.

He said the reforms will enable pension funds to invest more directly in real estate and infrastructure through joint ventures.

“Now, what does that enable? It gives us the chance to actually pool pension money, not only international but also German pension money, with a very direct investment ability from a fund into a JV, into the real estate and the infrastructure sector,” he said.

A central element is the removal of long-standing tax risks that previously discouraged integrated investment structures.

“Because they are taking away this huge risk of trade tax which was always there, banning people going into sensible economic structures, they had to legally separate them and therefore destroy value within the chain,” he said.

He added that legislative reform will support more efficient deployment of capital.

“Now, shifting this from the legislative side is going to give us the ability to have a direct investment into infrastructure and commercial activities, which is going to have a huge impact from our perspective,” he said.

Walter sees infrastructure-led strategies as central to building more resilient portfolios.

“And what is the core type, or the core essence, of infrastructure? It is way less volatile than real estate. So, you’ve got a steady income stream from the infrastructure,” he said.

He argued that combining infrastructure and property investment could help address wider social challenges.

“We can combine it with real estate and therefore have a real impact on big questions of the society. Like, how do we live? How do we combine living of the younger and the older generation? And how do we get back to vibrant inner cities?” he said.

Environmental performance, he added, will be central to future development models.

“Well, if we make them climate neutral, due to the fact that we have got renewable energies, and we can have a direct investment, we combine it with the real estate on which we are building it. It’s going to be a win-win for everybody,” he said.

Taken together, Walter believes 2026 will mark a transition away from financial forbearance and regulatory constraint towards tighter credit discipline and more flexible capital structures. While refinancing pressure is likely to expose vulnerabilities across parts of the market, he expects regulatory reform and pension-backed investment models to support a more stable and socially responsive phase of European real estate development in the years ahead.