Commercial Property Finance

With a market share of 60 percent Pfandbrief banks are important providers of commercial property finance in Germany.

In 2017, the vdp member institutions granted EUR 68.6 billion in loans for commercial real estate financing, slightly less than in the previous year. The decline in new business was largely influenced by the development of office segment, by far the most important market segment.

In recent years, the initial yields for office real estate in Germany have fallen sharply and have reached an extraordinarily low level in the long-term comparison. On the one hand, this was due to the sharp fall in capital market rates during the same period. On the other hand, this is due to the strong demand from foreign institutional investors for property investments in Germany. As a result, the capital values for office real estate rose much faster than the rents. For the next few years, this development is unlikely to continue in this form. The Pfandbrief banks are taking this development into account with their specific know-how in the sustainable valuation and financing of commercial real estate.

Commercial real estate financing, loan commitments vdp member institutions in EUR million

Source: vdp

vdp members: structure loan commitments 2017 according to property types
(Shares in percent, values rounded)

Source: vdp

A good 40 percent of the real estate lending portfolio of vdp member institutions is attributable to foreign countries. The UK, France and the USA are among the most important foreign markets. At the end of 2017, the volume of cross-border commercial real estate financing stood at € 95.5 billion.

Commercial real estate financing abroad, loan portfolio vdp members at the end of 2017 by country
(Shares in percent, values rounded)

Source: vdp