EUROPE - European real estate debt markets face a refinancing gap of €115bn over the next two years, and many lenders are unlikely to be able to extend loan periods any longer on certain properties, according to DTZ.

Konstantinos Papadopoulos, research analyst at DTZ, said this refinancing gap, which is greatest in the UK and Spain, posed the greatest challenge for the property sector.

The UK is said to have the largest share of the problem, estimated at €42bn, followed by Spain at €23bn, Germany at €9bn.

DTZ believes the affected loans will be not be refinanced after the current deadlines as banks are no longer able to extend loans to avoid imminent losses.

Hans Vrensen, global head of research at DTZ, said the "stalemate" that had prevailed over the past two years between banks and investors will come to an end and require €115bn of fresh equity to be pumped into the system.

That said, DTZ has suggested three ways of closing the gap: include pure equity injections; transfer of debt, either through restructuring by sale of the credit or bankruptcy; or a combination of the previous two.

Reaching such agreements between lenders and borrowers is not always easy and has led to protracted legal disputes and additional losses for both sides, DTZ said.

Papadopoulos said lenders will increasingly have to look at the refinancing options available to them.

Topics