Real estate debt: a growing market in motion (Roundtable 'Real Estate Debt – part 1)

November 24, 2025

^{This report was originally written in Dutch. This is an English translation.}

Real estate debt is gaining ground as banks retreat and private lenders step in. In part 1 of this roundtable discussion, six experts discuss market size, transparency issues and the reasons why institutional investors are finding this asset class increasingly attractive.

By Hans Amesz

This is part 1 of the report. Part 2 will be published on Wednesday 26 November, part 3 on Friday 30 November.

How big is the market for real estate debt in Europe, the United States and worldwide? And in emerging, public and private markets?

Christian Janssen: ‘There are no accurate or generally accepted statistics available on this. In Europe, it is estimated to be around one trillion euros in real estate debt, of which approximately 220 billion is in the United Kingdom. I don't think there are comprehensive statistics for emerging markets. In Europe, we are only active in private markets. We do not participate in the CMBS market.’

Andrew Gordon: ‘It is notoriously difficult to find reliable figures. This is because there is no central authority to which lenders are required to report their data.’

Janssen: ‘Reporting does take place and is actually improving. Studies have been published in the UK, Germany and France, and there are some jurisdictions where more and more figures are becoming available. This issue has been around for more than two decades, and market participants are demanding greater transparency.’

Gordon: ‘There is no data on the performance of funds, which is a major problem. MSCI has started compiling indices of senior debt funds and mezzanine debt funds.’

Janssen: ‘That is a valuable attempt to attract more investors to real estate debt.’

Antonio de Laurentiis: ‘Lack of transparency is an obstacle to providing information to investors, but at the same time it is an opportunity for us. We can capitalise on this inefficiency in the sense that we can achieve slightly better economic results than in a fully transparent market index that is much more correlated with the public market, as is often the case in the United States.’

What kind of investors do you see in this market? Private, institutional, family offices? Why are they buying these loans?

Gordon: ‘In Europe, it is mainly institutional investors: pension funds and insurers. There is some interest from family offices. In the United States, much more capital is raised from retail investors.’

Amina Ibrahim: ‘Interestingly, family offices are becoming increasingly involved in real estate debt, but they regard it as a supplement to their cash position. They are becoming more sophisticated and diversifying their portfolios accordingly.’

Nathalie Bruijn: ‘For some of our institutional clients, we can invest between 10% and 15% of their mandate in debt. We see this as a good diversification in the broader real estate portfolio and it contributes to the income return.’

De Laurentiis: ‘Pension funds want a stable income, but also an absolute minimum return. Insurance companies, on the other hand, are more responsive to relative value. They look at the illiquidity premium and also at the efficiency of the asset class in terms of capital treatment.’

Vincent Nobel: ‘We take a similar view: real estate debt can be a means of diversification for real estate equities. But we try to go a step further by saying that it should not actually be about higher-yielding real estate debt, because that often has slightly higher leverage and may correlate with equity. Our goal is to break that correlation.’

Gordon: ‘MSCI has compiled an index of senior debt funds. This index only goes back eight years and shows some inconsistencies, but it outperforms open-end pan-European real estate funds over that period.’

Nobel: ‘I think the goal is to outperform equities during, say, half of the cycle. If equities outperform debt in the other half of the cycle, that should result in a much smoother ride. After all, we have seen that even a core asset can behave quite disastrously if you own it at the wrong time.’

Janssen: ‘The market is evolving, mainly because the underlying leverage has changed. As a result, returns are starting to reach double digits, which is attracting a whole range of other investors. A significant number of players are starting to see real estate debt as an attractive alternative. Back leverage creates, in a sense, a synthetic mezzanine exposure, a way to cautiously increase returns. It increases the risk somewhat, but many investors are willing to take that marginal, incremental risk.’

Nobel: ‘I think the traditional view was that senior loans don't generate high returns, but they do deliver consistent returns. Real estate has a very asymmetrical cycle, say ten good years and two bad ones. Looking back over the past seven or eight years, senior loans have yielded higher returns than real estate shares, and with fewer bumps along the way, which is also worth something. It wasn't a free lunch, because when the tide turns again, we will earn less money than is possible with shares, but we will still earn something. The idea is that senior real estate debt is less dependent on market timing.’
 

When a project is underwater, mezzanine no longer adds value and people would rather see it removed.

 
Is the market growing? And if so, why?

Ibrahim: ‘The market has certainly grown. I think there are several reasons for this, but the most obvious ones are the cutbacks by the banks. As a result of stricter regulations, they have withdrawn as lenders. In principle, private and alternative lenders have been given more leeway for the kind of flexible solutions that many sponsors need nowadays. You can see that private lending is really stimulating growth in the market. Banks have a role to play, especially in the core sector where they can still bear the risk by essentially conducting standard transactions with a lower LTV (loan-to-value) ratio.’

De Laurentiis: ‘Banks are subject to stricter regulations. On the one hand, this limits the scope of their activities and, on the other hand, the flexibility they can offer in terms of leverage, types of loans, and so on. That is why the market share of alternative lenders such as ourselves is increasing.’
 

It is particularly difficult to find reliable figures. After all, there is no central authority to which lenders are required to report their data.

 
Janssen: ‘In recent years, refinancing has been particularly difficult for some property owners, partly because banks were uncertain about the regulations, but also because the availability of bank capital was simply limited. The only option these property owners had was either to go to a new alternative lender that had just raised money with very high return targets, or to go to their existing lender and ask for a deferral. The past few years have been almost a golden age for property lending.’