Energy-related inflation and other economic consequences of the war are set to “widen the credit gap in Europe’s real estate sector.” According to the analysis published by Philipp Wass and Thomas Faeh for Scope Ratings, although the sector has approached the current scenario from a more solid position than the 2022 crisis, risks for weaker profiles are increasing and the division will continue to generate “pockets of credit risk in 2026”. While companies focused on multifamily residential assets and prime real estate remain resilient, issuers with secondary and energy-intensive properties “are facing rising arrears, capex needs and refinancing tensions,” just as expectations for a rate cut fade.
Divergent markets and safe haven assets
The geographic landscape outlined by the report shows clearly defined winners and losers. Beneficiaries include the hospitality sector in Southern Europe, as Mediterranean countries “capture diverted tourism demand” and benefit from operator diversification. The luxury residential segment will also enjoy “safe haven status”, with concentrated demand where supply is structurally limited. On the trade front, Western Europe will benefit from “capital flight to countries with political and currency stability”. However, the report warns that overall inflation increases the cost of living, “reducing household disposable income and undermining affordability,” which could “dampen homebuyer enthusiasm.”
The wall of refinancing and the role of banks
The stability of debt markets remains a critical unknown. Analysts at Scope Ratings note that “swap rates have increased significantly since the start of the war,” creating uncertainty about the ECB’s path. For highly indebted borrowers, this environment tightens refinancing conditions just as the so-called “refinancing wall” approaches in the 2026-2028 period. Banks maintain a “conservative approach to lending,” prioritizing extensions of existing loans over new business. Despite this, demand could stabilize in 2026 thanks to “traditional and non-traditional sources”, but access will remain the prerogative of strong issuers with “high-quality assets”.
Decarbonization and risk of obsolescence
Pressure on energy costs reinforces the need to invest in sustainability. The EU Energy Performance of Buildings Directive (EPBD), which must be transposed by May 2026, will require owners to “invest heavily in insulation, energy systems and the integration of renewables”. This scenario will lead to a growing “brown discount” for non-compliant buildings and a premium for green assets. For the most indebted companies, such mandatory enhancements impose a “capital burden at a time when financing costs are high.” In particular, secondary offices are now at “risk of structural obsolescence” due to environmental requirements and changes in workplace preferences.
