There could be €42.5 billion of European real estate loan defaults, resulting in €14.5 billion of commercial real estate loan losses for lenders over the next three years, according to analysis from AEW.

In a new paper on real estate loans, the manager says its estimates are based on €572 billion of European real estate loans originated between 2018 and 2021 and equate to 7.5 percent of the total loan amount relating to defaults and 2.5 percent to losses. This estimate is similar to levels seen after the global financial crisis.

Estimated losses for retail asset loans are more than four times the overall average. AEW predicts losses on retail-backed loans in the 2018 to 2021 vintage could be as high as 11 percent of a share of all loans in the sector. This high loss could be triggered by more significant and earlier collateral value declines since 2018. Loans backed by offices are projected to have a 2.5 percent share of losses. The other sectors are estimated to