Real estate alternative lenders looks set to prosper in Europe throughout 2025.

In a new white paper on the European real estate debt market, DWS says the start of a new cycle, refinancing needs, as well as more restrictive capital requirements for banks, mean the set of opportunities for alternative lenders will widen, particularly in mainland Europe.

Although the interest rate environment is still elevated compared to previous years — and investment volume remain low as property owners wait for better exit prices — real estate fundamentals are improving. With a narrowing price gap between buyers and sellers, an increasing willingness of lenders to deploy money can be observed.

The attractiveness of real estate debt has also improved significantly for borrowers over recent months, says the manager. This is due to the return of a positive leverage effect, as lower long-term rates and higher property yields have pushed the spread between prime yields and debt