Positive outlook for real estate debt strategies in Germany

German real estate debt strategies are entering a new market cycle with improving fundamentals, despite continued fundraising challenges and selective competition for lower-risk assets, according to Patrick Züchner, chief investment officer at Aukera Real Estate.

Speaking to Real Asset Media, Züchner said Aukera benefits from a long operating history across cycles, even though the firm itself was established in 2020. “The team actually started very early in the cycle back in the day 2010,” he said. “We had the idea to create a German-speaking manager, and I think there was a need.”

He added that the firm’s local positioning extends beyond language. “The German angle, not only language-wise but also mentality and documentation-wise, helped us a lot to get traction,” Züchner said. During the previous cycle, the team “was able to raise and invest more than 4 billion,” providing a strong foundation at the start of the next phase of the market.

Aukera focuses on niche real estate debt transactions typically ranging between €10 million and €15 million. Züchner described this segment as “a nice sweet spot,” combining “an institutional type of property [and] an institutional type of sponsor,” while still benefiting from “a lack of competition in the market.”

The strategy is deployed across sectors, although Züchner said offices remain the most challenging. “It’s even the most critical, I think, for the office market,” he said, citing weak macro and global trends.

Despite this, he highlighted the role of experienced local sponsors. “They are nevertheless our local heroes, which concentrate on making real estate actively look nicer, feel nicer and get more attraction from tenants, and therefore also actively increase value.”

As an example, Züchner pointed to a recently closed office financing in the Netherlands involving a global seller exiting the sector and a local sponsor stepping in. “On top of the purchase price there is a 15% capex tranche within the loan to increase the ESG side of the property,” he said.

The building is “already 80% occupied,” and benefits from “an improving location,” which he described as “a combination of a niche product with a very bright future.”

Looking ahead, Züchner expects financing conditions to remain demanding. “2026 will still be a competitive market on the very simple product side,” he said, adding that “if you tick only nine out of ten boxes, it will be very difficult for borrowers to get financing.”

Based on his experience over the past decade, Züchner said capital deployment is rarely the main constraint in real estate debt markets. “Deal flow and deployment was never the bottleneck, but fundraising,” he said, noting that many German investors “struggle a bit these days to return to private debt, especially the real estate debt market.”

Despite this, he struck an optimistic tone. “The environment is very positive,” Züchner said, adding that Aukera has completed “a first closing of our pooled fund recently for 2026.”

He concluded: “I hope and I feel that this attraction will come back, that investors will invest heavily. The burden from the past is the success of tomorrow.”