The recovery in European commercial real estate is likely to slow as geopolitical tensions in the Middle East halt the expected decline in interest rates, according to Moody’s Ratings. Borrowing costs have risen again, increasing refinancing risk — particularly for loans maturing in 2026-2027 that were originated during a period of low rates and higher property values. Elevated rates and higher hedging costs are expected to pressure property values and limit transaction activity, reversing some of the gains seen in 2025. Credit conditions remain uneven, with highly leveraged borrowers and weaker property sectors facing the greatest strain, while safer instruments such as covered bonds continue to show resilience. Overall, prolonged tight credit conditions are likely to weigh on valuations, refinancing outcomes and market liquidity across Europe’s commercial real estate sector.
To read the full report,
