Media story: Debt outlook 2025

Lesley Lanefelt, head of Nordic Investments, Velo Capital

As we move into 2025, the European debt markets stand at a pivotal juncture. The lingering effects of stubborn inflation, high interest rates and evolving regulation, such as Basel IV, have created ripple effects that will shape credit markets next year – and beyond – as we enter a new structural cycle. As transaction activity gains momentum in 2025, the “new normal” for real estate lending will emerge.

The bottom of the cycle has been reached across our target markets, as evidenced by stabilising yields and increased bank lending appetite. However, Basel IV’s limiting effect on bank lending will be most acutely felt in Europe – particularly the Nordics and Germany.

As banks pivot toward lower-risk investments, construction and capex loans will be increasingly challenging to secure and this dynamic creates significant opportunity, particularly where the underlying fundamentals are strong, as the sector recovers from the construction slowdown of recent years.

We expect alternative financing to become more crucial to the stabilisation of the real estate industry in 2025 as sponsors seek to diversify lending sources. This translates into more requests from sponsors who would not have sought non-bank lender financing in the past and increased scope for collaboration with bank lenders.

Read the thoughts of other debt experts from Green Street News website: Debt outlook 2025: "An attractive entry point into the cycle" - Green Street News