2021 is set to be a year of slow accumulating sub- and nonperforming loans (NPL). The depth of impending loan defaults and insolvencies across Europe will be decided by the fate of government support schemes and insolvency law moratoria, which will come under huge pressure. The risk to the real estate market, therefore, is palpable.
Fundamentally, this NPL cycle will be different from the previous one, which began almost a decade ago and was driven by overleveraged real estate. By contrast, this coming cycle will affect a broader range of small and mid-size enterprises (SMEs). Within real estate, the sectors most exposed include retail (particularly high street and out-of-town shopping centres), leisure, and hospitality. To a lesser extent, non-CBD offices and certain residential segments, such as student accommodation, may experience weakened demand drivers, which could affect long-term cashflow forecasts and harm performance.
Banks will be unable to see the full impa
