The troubles of recent days in major real estate transactions in London and Frankfurt are just a sign that investors in the European real estate market are waiting for losses. The latter faced one of the biggest upheavals in history.

From refinancing an office building in the City of London to selling the Commerzbank tower in downtown Germany, investors are scrambling to find ways to fill a funding gap caused by rising interest rates, according to Bloomberg. A new reality will begin to emerge in the coming weeks as European banks begin receiving annual appraisals of the properties they have financed.

The expected significant drop in value could even lead to financial contracts being “ruptured”, forcing investors to resort to emergency measures such as forced sales and refinancing on much more onerous terms.

Europe is entering a new era after ten years of easy money.

“Europe is about to enter a new era after ten years of easy money,” said Scranton Baker, a partner at Apollo Global Management, at Bloomberg, believing that the total amount of loans that will become problematic will exceed any forecast.

Loans, bonds and other forms of loans secured by commercial real estate in the European Union and the UK or taken by real estate companies amount to almost 1.9 trillion euros. euro, which is almost equal to the size of the Italian economy.

About 20%, or about 390 billion euros, is repayable during 2023. It will also be the first critical test since the introduction of post-crisis regulations in 2008 to limit risk from the real estate market to the financial system.

European banks are being asked to act more quickly and aggressively on NPLs and are in a better position than during the previous crisis, so they have little reason to delay resolving problems in the hope of recovering property values. This increases the burden on creditors, Bloomberg notes.

So far, commercial real estate valuations have not fallen to the point of making bank debt problematic, but that may soon change. CBRE estimates that commercial property prices in the UK will fall by 13% in 2022.