Real estate insights: The debt funding gap in the European commercial real estate market

Purpose This real estate insights paper discusses how debt funding gaps can arise in commercial real estate markets and compares recent measurements of the funding gap for the European real estate market. Design/methodology/approach A review of largely practice-based literature is supplemented by worked numerical examples that provide transparency around how debt funding gaps have been measured at an aggregate level. Findings Recent estimates of the European debt funding gap have fallen in the range of €85bn to €115bn. The figures typically represent 15–20% of the debt originated in the years before the market downturn. Practical implications As well as creating challenges for existing borrowers and lenders, debt funding gaps can lead to inertia and reduce liquidity in the wider real estate market if refinancing situations are difficult to resolve. Originality/value Private real estate debt remains an area that is under-researched in an academic context, and this review maps out studies and sources that could form the basis for future investigations.